capital gains - property

downshifted

My husband has owned a house for 7 years in which a family member has lived rent free. It cost £132,500 and we have accepted an offer of £157,000. I have calculated purchase and sale costs of £3873 and renovation costs of £4926.90 and have invoices to support this. That makes a gain of £15,700.10. Minus the capital gains allowance (if sold before April 6) leaves £5100.10.

I have 2 questions please

Can he offset anything else? (I don't understand the last 3 years thing)

If he has not earned the full amount of his Income Tax allowance in the year, can he offset the remainder towards his capital gain?

Many thanks to those of you who patiently help out on this Forum

CLAPTON

has he ever lived in the house as his main residence

madgagoo

Renovation costs can only be claimed if they improved the property, not if it was general maintenance.

3 years exemption only applies if he has ever lived in the property as his main residence.

Don't forget the annual exemption of £10600. (Edit: you haven't!!)

Can't offset unused income tax allowance.

HTH

pjclar02

If it isn't too late in terms of the legals. he could transfer half of the property to you pre-sale, and if you have no other capital gains in the year could make use ot your annual exemption also.

nomunnofun

pjclar02 wrote: »

If it isn't too late in terms of the legals. he could transfer half of the property to you pre-sale, and if you have no other capital gains in the year could make use ot your annual exemption also.

A while back one of the regulars on here was highlighting hmrc challenges to exactly this - the advice was to wait some time between transferring and sale - perhaps someone can dig out the postings?

holly_hobby

Just to put a fly inthe ointment ...

• if the rental income was paid into a joint account (ie you jointly benefited from it)
• and you both independently declared it under your own annual SA for tax purpose)
• and/or you both funded the purchase
• and/or the sale proceeds will be jointly benefited from ....

Then on one or all of the above, you may apply to HMRC for their assessment and permission to split the gain equally, it being applied for under HMRC terms of benefical ownership (which is different to legal ownership), and upon which CGT liability is assessed, although of course one can be both a legal and beneficial owner. With HMRC's agreemet, you may then each apply your unused annual CGT allowance to your share of the profits.

To also answer, no you can't apply income tax relief to capital gains tax liability, nor may any unsued annual allownace be swapped between couples (married or not), nor may unused relief from previous yrs be carried foward (although historical CGT losses, if prev nominated to HMRC within permitted timeframes, may be carried fwd to future gains).

If regardless of legal ownership, the rental income was paid and declared by just you, with your partner having no apparant financial relationsip with the property - then both the legal and beneficial ownership is yours alone - with just your sole unused allowance CGT allowance (after permitted offsetting reliefs) against the total gain (if however this property ever acted as your primary residence before letting, there are various additional reliefs and allowances that may be applied - which from the figs you have discussed, would result in a £0 (nil) CGT liability).

If you are deemed as the sole beneficial owner, then yes you could effect a TOE between the both of you to mitigate the CGT issue, BUT, you would need to leave some daylight between this exercise and disposal of the asset, save giving HMRC any basis to asset a tax avoidance exercise.

As always, please ensure you verify and speak to your own tax practitioner, or HMRC, re tax comments on a forum, and how they will apply to you and your particular circs .... of whom both will be pleased to guide and advise you as reqd.

Hope this helps

Holly x

jimmo

nomunnofun wrote: »

A while back one of the regulars on here was highlighting hmrc challenges to exactly this - the advice was to wait some time between transferring and sale - perhaps someone can dig out the postings?

I think you’re referring to ceeforcat.

If so here’s one thread but there have been others.

https://forums.moneysavingexpert.com/discussion/4049157

ericonabike

Or you could just pay the tax of £2k or so on what is effectively unearned income of £25k?

downshifted

Thank you for all the constructive and helpful replies. He will be paying tax on the required amount (the "unearned" income is no-where near £25k erica - as you would see if you read the first post properly - onyerbike!)