Capital Gains tax

lookin4arnserz

Hi
I'm a married guy and an only son who inherited my fathers house when he passed away in April 2004. After emptying the property and decorating throughout, we tried selling it without success so decided to rent it out with a letting agent. I had my wife's name added to the deeds so we now own it jointly. The agent found us a tenant in February 2006 who has remained in the property ever since.
I do realise CGT would be calculated from the date I inherited the house in April 2004, not from when we started letting it.

Back in 2005 when we were trying to sell, the estate agent valued the property at £155,000.

Q1. What price would the property have to valued at on today's market if we decided to sell for us to be liable for Capital Gains Tax?
I think its gain since 2004 would be well below £20.000 if that much.

Q2. Is it true that each named owner of the house has an allowance against CGT becoming payable?

Q3.IN GENERAL

I have heard unofficially that CGT can be avoided if after a property is ended being rented it out, the owner or their spouse were to occupy the property for 12 months prior to it being sold, CGT would not be an issue.
Is there any truth in this?


Many thanks in advance

Annisele

If the property has gone up in value by less than £20,200, and you don't have any other capital gains this year, then you don't need to worry about CGT at all - the gains fit in your (and your wife's) annual exemption.

HMRC has a brief guide here.

00ec25

just to clarify you also use the value from the award of probate for calculating the gain, its not just the date when you inherited its also the value when you inherited not when you tried to sell it - unless of course you meant £155k was the offical probate value

as far as your gain, you being legally married and in joint tenancy, your wife now owns 50% of the house with the cost being probate value x50%

you will each have to account for your gain individually

assuming you have not yet sold it, as we are now in 11/12 tax year so you can make £10,600 gain (11/12 rates here) before CGT is payable. Your share of the gain being the sales price (less costs of selling) - the probate value x 50%

Same applies to wife

re Q3
Given your limited understanding you would be better paying for professional advice on how to do it correctly. You have only partially understood this, in essence it is allowed, but it is much more complex than your post, for example it involves 3 linked issues :

i) If you sell a house which was once your main residence this automatically gives you 3 years of CGT "deemed occupation" exemption, but if the occuaption is at the end of the ownership period then you can't claim twice eg: own 10 years rent 9yrs live in it for final year - exempt 3/10ths , liable 7/10ths x value of gain during entire ownership period. You will never be 100% exempt simply by moving back in if you have owned the place for more than 3 years

ii) if it was at any time your main residence (even at the end), and then let out, you can additionally claim lettings relief of up to £40k per owner on top of the £10,600

iii) never having previously lived in it, and then moving in at the end (and critically assuming you have owned the place for more than 2 years), means you will not be able to make an election to treat it as your main residence. Therefore your claim that it is your main home will be based entirely on the quality of your occupation. It is an absolute myth that this is based on the minimum time you live there, it is not, it is based on a "matter of facts" eg: you both live there as a couple, you commute to work from there, your social life is there and friends expect to find you there. Simply saying you live there is not enough, but clearly the longer you are there the easier it is to demonstrate real occupation. Also of course the place that was previously your home is now starting to be liable to CGT so it's a trade off as you would need to sell the old place within 3 years of moving out otherwise that will be then itself be liable to CGT

timed right and particularly ensuring you meet iii) above, it is perfectly possible to sell 2 houses within 3 years of each other and have reduced or nil CGT to pay depending on the value of the gains and the totals of the relief

xjessie007

In regards to Q2, if one co-owner fails to pay, the other co-owner is still liable.

johnwarner75

Im guessing that you prob fall just out side of the £20k increase, If you do then it will need adjusting slightly. I think you can pay in instalments over time though..