Capital Gains Tax Query

MustStopSpending

I have googled this over and over but was hoping for a plain English response from one of you kind folk!

My hubby is selling the home he owns with his ex, it is shared ownership and they have no mortgage on their share. He did not pay to buy it, it was a scheme where he built it & was then given his share for free so to speak.

He is going to make about £21k profit, he earns £26k a year salary (not sure if that is relevant) and obviously it is not his main residence and hasn't been for over seven years.

How do I work out the CGT owed?

Thanks in advance.

holly_hobby

Market value of the share he was gifted LESS sale price.

That gives his gross gain for CGT.

If he lived in this from outset, but later moved out, he can under Primary Residence Relief (PRR) apply to this gain the number of yrs he lived there (in months) PLUS an extra 36 mths - meaning (as he hasn't lived there for 7 yrs), that he will have 4 yrs/48mths of gain that is left for taxation.

To this he applies (assuming he does not qualify for any improvement costs), his annual unused CGT allowance, which is £10,900 2013/14).

If there is any residual amount left for tax (which I doubt there will be), it will be taxed at 18% (as with an income of 26k, he is a basic rate tax payer).

It should also be noted that CGT is based on beneficial ownership, which does not necessarily have any connection with legal ownership. Which means that if you can satisfy HMRC, that you are a joint benefical owner with Hubby of his share, ie you jointly paid with him any share of mge whilst owned (ie perhaps evidenced from a joint bank account and/or you jointly made any contirbution necessary to his ex for repairs etc and/or the proceeds will go into a joint account etc (list not exhaustive), you will be permitted to also apply your own CGT nil rate exemption of £10,900 to the sale proceeds - (making a total joint available exemption of £21,800 ). BUT on the figs quoted, I don't think this will be necessary - however you will know more onc you have the market value assesmsent and have crunched some figs.

As always, please always verify with HMRC or your own tax adviser how comment relates to your acutal situation, before proceeding with any forum general tax discussion .

Hope this helps

Holly x

MustStopSpending

Thanks very much for your response, much easier to understand and greatly appreciated!