Capital Gains Tax on Selling House

rcgood

Looking for advice on the situation as below.

1) When I retired my wife (retired) and i decided to move form our home of 25yrs back to where we lived previously.

2) We put our house up for sale but so far have had very little interest from would be purchasers.

3) Due to fact we hadn’t sold I had to use all of my retirement lump sum (Tax Free) plus savings to purchase our new home.

4) A friend has pointed out to me that they believe if and when we sell our original house, the cash from the sale would be subject to capital gains tax?

5) If we had been able to sell our original house and then used that as part payment on the new house, that cash would not have been subject to Capital gains Tax. I would have had to top up the cash with my Tax free Pension lump sum to the purchase price of the new house.

On the face of it, we seem to be getting bumped by the Tax man. My Tax free lump sum has now become taxed because due to market conditions we can’t sell our original home and is tied up in the original home.:(

Is there any way legally around this?

hunnie

Hi,
I think the last 3 years of ownership are exempt from capital gains tax if you have ever lived in the property.

hunnie

rcgood

Thanks, i saw that on the Government web site but i didn't understand it, we lived in the house from September 1984 - September 2009.
And moved into our new home in October 2009.
Does that mean if we are able to sell within 3 years we don't have Capital Gains on the selling price?

RAS

Yes

And that if you sell after September 2012, you can still use your CGT allowance.

rcgood

:jThat's good thanks, we might still be able to take the big trip we had planned before the economic crisis hit my retirement plans.

silvercar

Even if you didn't sell within 3 years of moving out, you would only be laible for CGT on a small portion of the gain.

rcgood

The portion subject to CGT would be the difference between original purchase price in 1984 and the selling price?
Can couples claim CGT relief for both as house is in both names?

silvercar

You each have a CGT allowance, currently £10,100.

If you bought in 1984, lived in it until 2008 and sold it in 2012 - out of 28 years ownership you would be exempt from CGT for the 24 years it was your home and the 3 last years of ownership so 27 out of 28 years. The gain (sale less purchase price less improvement costs and less buying and selling costs) would be calculated and you would be exempt from CGT on twenty seven twenty eighths of the gain. You would then put your CGT allowances against this one twenty eighth of the gain to calculate if there would be any liability left.

rcgood

thanks everyone for the information, made a retired couple a little bit happier:T