Capital Gains Tax question

fizz07

Hi guys

I have been reading on the HMRC site about capital gains tax but cannot seem to get an answer to the following:

Me and my father bought a house on a joint mortgage a few years ago in which we now both live. He has decided to put his previous house up for sale that he lived in prior to living in the new (mortgaged) house. The house up for sale does not have a mortgage, but the new one does.

I also have another joint mortgage with another family member for a house they live in.

If and when my father's house sells, will he be liable to capital gains tax? For info, the mortgage on the new house is for more than he will receive for the old one and all the proceeds of the sale will be going into paying part of the mortgage on the new house. Any help would be appreciated.

Pennywise

Forget mortgages - they're completely irrelevant for capital gains tax.

CGT is based on the difference between the original cost price of the house and the eventual selling price, all adjusted for buying/selling costs and any improvements made over the period of ownership.

The period in which he lived in the house as his principal private residence is exempt as are the last three years of ownership.

So if he owned it for 20 years, lived in it for 10 years, then he's got a taxable gain of 7/20ths of the "gain", i.e. 10 years in which he lived in it plus the final three years are exempt. It's all done on time apportioned basis, not on values when he moved out.

There will also be lettings relief if he's rented it out after living in it.

fizz07

Pennywise wrote: »

Forget mortgages - they're completely irrelevant for capital gains tax.

CGT is based on the difference between the original cost price of the house and the eventual selling price, all adjusted for buying/selling costs and any improvements made over the period of ownership.

The period in which he lived in the house as his principal private residence is exempt as are the last three years of ownership.

So if he owned it for 20 years, lived in it for 10 years, then he's got a taxable gain of 7/20ths of the "gain", i.e. 10 years in which he lived in it plus the final three years are exempt. It's all done on time apportioned basis, not on values when he moved out.

There will also be lettings relief if he's rented it out after living in it.

Thanks for the reply. Well the property was bout for 8k approx 30 years ago on a mortgage that was settled around 5 years ago. It was lived in all that time minus past 2 years when we bought and moved into the new home.

ceeforcat

If he lived in it up until two years ago, there will be no Capital gains tax to pay.

jgh

"Me bought a house"? I think you should sue whoever taught you english.

ognum

jgh wrote: »

"Me bought a house"? I think you should sue whoever taught you english.

This is neither helpful or polite. I think you should sue whoever taught you manners, trying to be superior in this way is pathetic.

pjclar02

ognum wrote: »

This is neither helpful or polite. I think you should sue whoever taught you manners, trying to be superior in this way is pathetic.

Indeed - especially where the said smug comment contains a grammatical error itself!