Selling a second home. Advice please.

Fruity1

A Valuation wasn't done at the time so we are estimating it was worth £70K. Are there any loopholes or ways of avoiding Capital gains tax? The council tax is now in my mums name but the utilities are still in my nanas name.

silvercar

The gain is 125-70=55k.

less say 2k selling costs=53k.

7 years ownership gives taper relief at 25% ;leaving 75% of 53k=£39,750

less CGT allowance of 9,200=30,550. taxed at 20% is 6,110 at 40%=12,220.

Possible reduction
Does she own it on her own? Is she married to your Dad? If so, she can transfer the property to joint ownership and then they would each benefit from £9,200 CGT allowance.

The gain would be £19,875 each. Less £9,200 CGT allowance=£10,675 taxed at their marginal rate (20%=2135, 40%=4270).

Sale should be at least 7 years after purchase, you don't get taper relief on part years.

Gain would be included in her tax return (request one if nec.) and payable by the end of Jan following the end of the tax year. So sell now and pay by Jan 2009.

Fruity1

Thanks for this information. May I ask does a period of time have to elapse after my dad (they are still married and together) is put on the deeds before they can sell? Probably a dim question but does my mum have to keep the money until she pays the tax? The reason being she has siblings awaiting their share (tho my nana is still alive). If she has to keep the money until she pays the tax Can she put it into a high interest account? I am guessing she needs to pay a trip to the solicitor.

silvercar

Thinking about it, your Dad wouldn't have owned it for 7 years, so would not get the taper relief, but would still be able to use his £9,200 CGT allowance. Whether this is worthwhile depends on their individual tax rates.

She can do what she likes with the money, though sensible to put the tax away until it is needed.