CGT on shared ownership with Dad

catmeow50

Hi all,
Not sure if this is for here or for the tax

I am looking for some advice as I am in the process of selling my apartment which I co-own with my Dad. I was living in the property when it was sold and therefore I avoid the capital gains tax on the sale, but my Dad wasn't and whereas he has calculated this income on his income tax and found he is still under the threshold for going into high earner tax status I am wondering if he has looked into the capital gains tax issue.... He says he doesn't have to pay anything but as he wasn't living in the property (and never has) I can't seem to find anything saying he is exempt.

He does stand to get a reasonable amount, around £37k so it is over the threshold but I can't find out if he will have to pay or if me living there gets him off the hook for it. Also wondering if he is liable how that would work out.

Any help on this would be appreciated as he is swanning around without a care in the world and I would hate for him to suddenly hear from the tax man and get a shock as this is meant to be propping up his pension in 5 years time.

Thanks!

Cat

saajan_12

He pays CGT on his share of the increase in house value. So his share of

Sale price - Purchase price - buying/selling/capital improvement costs - 11.3k

(his annual allowance assuming he hasn't made any other capital gains this year)

Let X be 40k - his personal income. The first X of the above is taxed at 18%, the rest is taxed at 28%.

Pixie5740

If your father has a beneficial interest in the property then he will be liable for CGT because it is not his primary residence.

Here is a link to the mechanics of the CGT calculation.

CGT

00ec25

he is liable to CGT on the assumption he himself has never lived there as his own main residence? Given you say it "will be propping up his pension" it appears safe to assume he expected to get some money form the deal so he does indeed have a beneficial interest and is thus liable for CGT on his investment gain.

You are correct in assuming you yourself are exempt from CGT on the assumption if has always been your main home.

he must add his share of the gain as shown in post #2 above to his total taxable income, lets call it figure "A" (ie gross income - income tax allowance 11,500) to give what is called his "total income", lets call it figure "B"

he pays CGT at 18% on the difference between his taxable income figure "A" and the higher rate threshold of 33,500

having dome that calculation he then pays CGT at 28% on the amount between 33,500 and figure "B"

so with a gain of 37k (has he already taken off the CGT allowance of 11.3?) it is certain that he will have to pay some tax at 18% and some at 28%

catmeow50

The total he will gain after the £11,300 allowance is £17,920 so he will definitely have to pay some, it just depends on his income as to how much.

If I lived there for 4 years from 2008 then rented it out up until 3 months ago would that mean I am liable for some as well? It was my main home at the point of sale and I have not owned any other home in the meantime but he does own his main home.

This is why I get a little confused but I want to make sure we pay what we owe.

Slithery

catmeow50 wrote: »

If I lived there for 4 years from 2008 then rented it out up until 3 months ago would that mean I am liable for some as well?

Yes. You're also liable for CGT, although you may not have anything to pay once your allowance is taken into account. You still need to do the calculations to make sure.

00ec25

catmeow50 wrote: »

The total he will gain after the £11,300 allowance is £17,920 so he will definitely have to pay some, it just depends on his income as to how much. correct, it would appear he owes tax

If ? either you did or you didn't, which is it? I lived there for 4 years from 2008 then rented it out up until 3 months ago would that mean I am liable for some as well? It was my main home at the point of sale and I have not owned any other home in the meantime but he does own his main home.

This is why I get a little confused but I want to make sure we pay what we owe.

!!!! why didn't you say that to start with

YOU are liable for CGT because the property was NOT your main home for the entire time you owned it.

But, whether you have any CGT to pay depends entirely on the outcome of your own calculation on your share of the gain. You (not your father) can claim both private residence relief and letting relief, on top of your personal CGT allowance. That may mean you have zero to pay

catmeow50

I'm sorry I was told by a number of people that as it was my main home at the point of sale I didn't pay anything but from the link I was given earlier it would seem it was relevant. Now I know that it is I will have to try and apply the allowances to the dates I didn't live there and try to calculate it from there.

cte1111

You will be entitled to Principal Private Residence relief for the period that you lived there, plus the last 18 months it was owned. As it was let out, you will also be entitled to Lettings Allowance, which is the lower of:

The actual gain during the let period
The PPR
40,000

This sounds like your gain may be well within your annual CGT allowance. You and your Dad should both do self assessment tax returns for the year when the flat is sold, to make sure it is all calculated and declared accurately. You might both be well advised to pay for proper tax advice from a qualified professional, rather than relying on possibly inaccurate advice from well meaning friends and strangers on the internet.

catmeow50

Yes I'm starting to think that with the allowances and such it might be a good idea! It just seemed a little too good to be true that we didn't have to pay so thanks for all the info!