Capital Gains on House Sale

cuthbert1

Hi,

I bought a house 14 years ago for £X and lived in it for 8 years. When I moved out, I gifted the house to my wife and we let the house to tenants.

The house is now worth £Y. I know that if I had kept it as my own, if I sold it now, the capital gains tax would be based on the proportion of the time I lived in it (8/14) and the gain (£Y-£X).

However, I don't own it, my wife does. So, two questions:

1) If she sells it, will she have to pay Capital Gains Tax on the full price, £Y as that is the gain she made?

2) Assuming the answer to 1) is yes, if she gifted it back to me again, could I use the 8 years and the £X pounds in my tax calculation?

Thanks

xylophone

http://www.taxinsider.co.uk/681-How_to_Correctly_Gift_Property_to_Spouses.html

might be of interest.

quietriot

cuthbert1 wrote: »

Hi,

I bought a house 14 years ago for £X and lived in it for 8 years. When I moved out, I gifted the house to my wife and we let the house to tenants.

The house is now worth £Y. I know that if I had kept it as my own, if I sold it now, the capital gains tax would be based on the proportion of the time I lived in it (8/14) and the gain (£Y-£X).

However, I don't own it, my wife does. So, two questions:

1) If she sells it, will she have to pay Capital Gains Tax on the full price, £Y as that is the gain she made?

As you were married, when you transferred the house she will be treated as having acquired it for £x.

https://www.gov.uk/capital-gains-tax/gifts

cuthbert1

Thanks to all who replied. The suggestions and links led me to a page on the HMRC site that says that a transfer of property to a spouse also transfers the purchase price and date for PPR purposes. As we were married and living in the property at the time, my wife is treated as having bought the house when I did.

TH1878

cuthbert1 wrote: »

Thanks to all who replied. The suggestions and links led me to a page on the HMRC site that says that a transfer of property to a spouse also transfers the purchase price and date for PPR purposes. As we were married and living in the property at the time, my wife is treated as having bought the house when I did.

I would revisit your calculation as well.

You will get 8 year relief from CGT where it was your Principle Private Residence and you will get relief for the last 18 months of ownership. You may also get lettings relief for the years it was rented out.

CLAPTON

TH1878 wrote: »

I would revisit your calculation as well.

You will get 8 year relief from CGT where it was your Principle Private Residence and you will get relief for the last 18 months of ownership. You may also get lettings relief for the years it was rented out.

the OP doesn't get any relief as the property is no longer his: it is his wifes

I don't think she will get PPR relief as although she lived there she wasn't the owner at that time

purdyoaten

CLAPTON wrote: »

the OP doesn't get any relief as the property is no longer his: it is his wifes

I don't think she will get PPR relief as although she lived there she wasn't the owner at that time

I agree completely.

When house was gifted to his wife, the wife would be deemed to have acquired the property at the original cost when purchased by the op. The op, even though there would have been no CGT (husband to wife transfer) also gave up all entitlement to PPR at that point.

His wife has never lived in the property while she has been the owner and PPR does not come into play at all - it is not transferrable from her husband! She is now liable to CGT on the gain from when her husband bought the house until sale - even though she was not the owner for 8 years AND lived in the property for the same period.

One of those 'it seemed a good idea at the time' moments which one sometimes comes across!