Getting married - CGT of 2nd home

PJ1973

Hi there.


I’m gettingmarried next year:beer:, which is great new but unfortunately it might have a negativeeffect from a tax point of view .



Girlfriend boughther house 10 years ago for £80K it’s now worth £110K . . . . so £30K capital gain. The house is in her sole her name and she hasbeen renting it out for the last 4 years – during which time she has lived withme in my house (in my sole name).



We want to avoidselling her house if possible as she sees it as a bit of a pension (plus we don’treally want to upset the tenants – recently had baby:A). . . but from what I understand,when we get married it will be deemed a 2nd home and will thereforebe subject to CGT (I’m a higher rate taxpayer – which might make it evenworse).



A cursory look onthe web is getting me pretty confused.



Basically I wouldlike to know whether I can (a) avoid the tax without having to sell (b) if we can’t avoid it – a rough idea of how much we might end up paying(e.g. are there any reliefs?)



Any help appreciated.



This could bedodgy, but we are actually getting married in the USA, so whilst we will belegally married for UK purposes . . .. it won’t actually be registered in theUK. Presumably this could just become abug can of worms?

Phil

anselld

If it is tenanted it is subject to CGT anyway as it is not her private residence. Getting married will make no difference.

xylophone

http://www.hmrc.gov.uk/cgt/property/sell-own-home.htm#1
might help.

CLAPTON

You realise that cgt is only payable when you actually sell the property?

If she does sell, as it was once her principla private residence she will be eligible for several reliefs:
PPR for the period of residence plus last three years plus letting relief plus a 10,600 cgt allowance
which means she will pay no tax anyway.

00ec25

as C;apton says on those figures she has no tax to pay

9 out of 10 years to date are exempt under PPR - lived in 6 years plus last 3 years = 9
then she gets letting relief worth up to a max 40K
then she gets personal allowance 10,600

given current property price movements it will be some time before she has a net gain which is not fully relieved

PJ1973

Thanks for the replies.

I realise CGT is only payable when the house is sold.

I was just trying to establish whether or not it would be more advantageous to sell before we get married. By the looks of it, it makes no difference as appears there is no tax to pay (unless house prices shoot up).

Once again - thanks

PJ

CLAPTON

PJ1973 wrote: »

Thanks for the replies.

I realise CGT is only payable when the house is sold.

I was just trying to establish whether or not it would be more advantageous to sell before we get married. By the looks of it, it makes no difference as appears there is no tax to pay (unless house prices shoot up).

Once again - thanks

PJ

One would image that when you eventually sell that you are hoping for a massive tax bill.

dan.date66

with the tax rules.

Under independent taxation, the gain on the eventual sale of the property is entirely hers, nothing to do with you whether married or not. So as the other posters have intimated, no real CGT worries as the gain is so far quite small and a fair amount of reliefs to utilise.

Where you may be confused is that if you were now to buy another property as a married couple, you are correct in your assumption that only one property can be designated as your principal private residence, therefore CGT due on the second home.

But as things stand, your wife's old property is entirely hers for tax purposes, and your personal tax bracket has no bearing on it.

PJ1973

I admit this is all very confusing to me, but I do realise the gain would be hers. However as we are 'together' I would be sharing the burden/paying for it, hence the interest . . . plus who wants to pay extra taxes?

What originally sparked my question was the following article:
http://moneytothemasses.com/money-tip-106-%E2%80%93-getting-married-could-land-you-with-an-unexpected-tax-bill

After we get married, aren't we suppose to nominate a single house, as per the following (i.e. it will affect the tax position of her house)?

http://www.hmrc.gov.uk/cgt/property/sell-own-home.htm#1
If you're married or in a civil partnership and own two or more homes between you, any nomination must be made jointly. It must be signed by both of you. You're only entitled to Private Residence Relief on one home between you.


Don't suppose anyone knows of a calculator where I can input all this 'stuff' to play around with different scenarios?

Thanks again for the patience.
Phil

CLAPTON

PJ1973 wrote: »

I admit this is all very confusing to me, but I do realise the gain would be hers. However as we are 'together' I would be sharing the burden/paying for it, hence the interest . . . plus who wants to pay extra taxes?

What originally sparked my question was the following article:
http://moneytothemasses.com/money-tip-106-%E2%80%93-getting-married-could-land-you-with-an-unexpected-tax-bill

After we get married, aren't we suppose to nominate a single house, as per the following (i.e. it will affect the tax position of her house)?

http://www.hmrc.gov.uk/cgt/property/sell-own-home.htm#1
If you're married or in a civil partnership and own two or more homes between you, any nomination must be made jointly. It must be signed by both of you. You're only entitled to Private Residence Relief on one home between you.


Don't suppose anyone knows of a calculator where I can input all this 'stuff' to play around with different scenarios?

Thanks again for the patience.
Phil

Nominating a property as your PPR ONLY applies if you have two properties that you actually live in
e.g. you have a flat in london and a country house and live part of the time in both.

It does NOT apply if one is rented out.