Capital gains tax liability??

paul123

Hi
I have recently split up with my partner ( we were not married) and have come to financial arrangement ourselves. She at present is stopping in our main home and I will be moving in to our buy to let second property which has no mortgage and will me my main residence. My name will be on the title deeds only, and at present we have joint names on the deeds on our old main residence. I need to move in with my sick mother to look after her some time in the future so will be selling the old buy to let. How long do I need to live there the avoid paying CGT? Any comments would be appreciated.:(

00ec25

Clarifications please:
Old main home – joint ownership (50/50), you are moving out but joint ownership continues? Will the ex be selling it within 36 months of you moving out?

BTL: current status - joint or single name ownership? New status in your name only


Re the BTL
a minimum occupation period is NOT defined in tax law, the test of what is your main home is a test of fact (assuming you have owned the BTL for more than 2 years and thus it is now too late for you to make a CGT election).

The facts are therefore either you live there as your main home or you do not, obviously being there 1 week is less believable than 1 month, but 1 month might be accepted if your next move is for a believable reason which shows you could not have gone from a) to c) without first having lived in the BTL, only HMRC can judge this

You may have a CGT liability for the period before you move into the BTL as your main residence but the size of that depends on:
a) whether it was joint or single ownership so how much of the pre move in gain is yours and whether it is covered in full by your own CGT allowance;
b) Please note it will also be affected by your claim for letting relief once you have lived in it as your main residence and therefore make such a claim

Re old home
If it continues in joint names and is not sold within 36 months of you leaving then you will have a CGT liability when it does sell as you will still be a part owner of a non main residence

silvercar

Once you live in the BTL as your main residence you will be exempt for CGT for the time it is your main home and the last 3 years of ownership. You will also be entitled to letting relief (min of gain while it was let, gain while it was PR and £40k) and have your CGT allowance of £10,100. All this is calculated as proportions of time, there is no need to value it at the point you move in. Post the purchase price and date and the likely selling price and date if you want a rough calculation.

You need to sort out the transfer of your share of your main home to your ex, within the next 3 years or risk a CGT liability on that.

sunshinetours

Firstly have the values of the properties actually gone up since you bought? If you bought within the past couple of years chances are you don't currently have any CGT issues (regardkless of the relevant points made above) because there may not be much profit.

If that isn't relevant the above posts cover the main points you need to consider

paul123

Hi
Thanks for the replies, purchase price was £117k around 8 years ago, selling price 2011 I am guessing at £180k
Thanks

paul123

Sorry forgot to add main residence will still be in joint names at present,
BTL is in my name only.

silvercar

paul123 wrote: »

Hi
Thanks for the replies, purchase price was £117k around 8 years ago, selling price 2011 I am guessing at £180k
Thanks

All calculations would be done in months for accuracy, but for simplicity lets just consider years.

Gain = 180-117 =63k less say 3k buying and selling costs ; so gain is 60k.

let for 8 years, then you live in it for one year.

PPR relief = last 3 years = 3/9 = a third of 60k = 20k

letting relief = min of 40k, PPR releif= 3/9 (20k), time it was let = 8/9 = 53k ; min = 20k.

gain = 60-20 (PPR)-20 (letting) = 20k.

you then have personal CGT allowance of 10.1k if not used elsewhere. This leaves liability on 20-10.1=9.9k. Include in your tax return for the year in question and pay the tax (CGT rate is 18%) by the end of Jan following the end of the tax year. So under current legislation the bill would be 9.9k x 18% =£1,811.

silvercar

paul123 wrote: »

Sorry forgot to add main residence will still be in joint names at present,
BTL is in my name only.

Well there is no liability on that if it is sold or transferred to your ex within 3 years of it not being your main home. After that there could be some liability. Again you have your CGT allowance (if the transfer sale isn't made in the same year as the BTL sale).

Better to get these things sorted out for a number of reasons:
a) if you want a mortgage of your own, you will have to declare this other mortgage;
b) better to break financial links with ex-'s where possible;
c) talk of CGT being raised from 18% in the future.