Will Capital Gains Tax be payable on home sale?

sanuk

Hi Experts. Hope you can advise me on whether I (or estranged husband) now have to pay CGT on sale of our former main home. It's a long-ish tale, so please bear with me . . .

We have owned the property for over 12 years, living there full time for approx 8 of those years. We began working/volunteering overseas in 2008 and occupation of the house was thereafter sporadic. It was let to a friend for less than £4,200/year for a few years, but I have been in residence and paying council tax / bills / on electoral register again for the past 15 months.

We have been trying to sell the property for over 3 years (taking it off the market every December for a few months whilst ex-UK) and have just re-advertised with estate agents. Property was valued at 275K and had several 250K offers (rejected) over the years. Changes to stamp duty are now likely (I hope) to prompt better offers and we will have made approximately 60K 'profit' (although home improvements have cost in excess of 30K over this time).

Two and a half years ago we both inherited money (and paid IHT on it!!) and decided to move. We managed to scrape enough cash together to buy another house whilst waiting for the original to attract a buyer. Unfortunately we have separated and husband now lives in the 'new' property whilst I occupy the old one. We are registered as joint owners of both houses at The Land Registry.

I am registered on electoral register, council tax bill, energy bills, bank accounts, driving licence etc at the first (main) house. My estranged has all his accounts/registrations at the 'new' place. We no longer have any financial connections in common and I have not officially lived in the 'new' house or used it as my main home.

I've just read that CGT may be payable on the 'profit' that we make on the sale!! Had the house not been held back by the 250K barrier for several years we wouldn't be in this position as it would have sold and formed part of the sale/purchase chain. New place hasn't particularly gained in value and has cost him over 40K so far in renovations.

I hope that I'm wrong and that neither of us has to pay CGT when the 'old' cumbersome beast eventually sells. Estranged has a very small works pension - £3,500/year - and no other income other than tiny interest on a 20K ISA.. I am living off my meagre remaining savings - a little in excess of all benefits/rebate entitlements. Seem to have to pay pay pay out at every turn.

What is the situation regarding CGT and what can we do? Any advice gratefully accepted.

Tixy

In theory you may need to pay some capital gain tax in relation to the period where the property was let out.

In practice it sounds like the proportion of any gain that would relate to the period it was let out may well be under the capital gains allowance (assuming you don't have other capital gains in the same tax year).

But it will depend on exact figures, exact dates, split of ownership etc.

pleasedelete

Why on earth are you selling? Where will you live? being a pensioner in rented accommodation- possibly having to move constantly is awful. Do a settlement based on 1 house each.

sanuk

just like to clarify that neither I nor estranged are state pension age yet (he managed an early access deal) and that old age in rented accommodation is highly unlikely so definitely want to sell 'main' house. Split will be 50:50. Realise that I probably won't have CGT liability as it's my main home but am less sure about estranged's situation. Any knowledge out there? Thanks to respondents so far.

Tixy

It would depend on what periods the property was classed as his PPR.

The years working abroad may or may not count. If he lived in the UK after that but not at the property then it would't be classed as his PPR for that period. But the last 18months of ownership always count towards the PPR.

So overall he'd need to work out what proportion of the time the property was owned was he eligibile for PPR Relief and then when he knows the eventual gain he has made from the property will be able to calculate the gain that is subject to capital gains tax.

(PPR is principal private residence).

konark

You say you have had the property 'over 12 years which means you bought it maybe in 2002. You claim you will make £60,000 profit on a sale price of £275,000. Yet in the last 12 years or so property prices have more than doubled, why has your house done so badly?

Assuming your £60,000 profit is correct, and assuming you jointly own the property, then the 8 out of 12 years you have lived there will reduce CGT liability to £20,000 which is less than your combined CGT allowance. You could reduce this further by lettings relief for the years it was rented and you can also deduct any money paid for improving (but not maintaining) the house.This would bring you to a figure of about zero so you don't have to worry about CGT , I'd be more worried how my house had only risen in value by 25% over 12 years.

AdrianC

sanuk wrote: »

Two and a half years ago we both inherited money (and paid IHT on it!!)

Small detail - you didn't pay IHT on the money you inherited. The deceased paid IHT on the total of the money they left.

sanuk

konark wrote: »

You say you have had the property 'over 12 years which means you bought it maybe in 2002. You claim you will make £60,000 profit on a sale price of £275,000. Yet in the last 12 years or so property prices have more than doubled, why has your house done so badly?

I'd like to know this too Konark! Bought in 2003, nice property, nice area, bit small possibly, poured quite a lot of cash into renovating it and now having problems selling . . . estate agents advising that possible barrier (250K threshold) now reduced with stamp duty changes. Maybe paid too much for it? Don't know.

Thanks for your advice and suggestions.