We're aware that some users are experiencing technical issues which the team are working to resolve. See the Community Noticeboard for more info. Thank you for your patience.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Capital Gains Tax on a shared ownership property

Options
I'll try and keep this brief...

In March 2013 I individually purchased a 35% share in a property to be my main residence for £265,000 (my share equated to £92,750), with a housing association owning the remaining share. In August 2015, I staircased to purchase the remaining 65% from the housing association with my wife, with the property valued at £340,000.

I moved out in February 2017, but have kept the property as a buy-to-let since then.

I now intend to sell the property and am fully aware there will be CGT to pay on this. However, will the amount I need to pay be on the difference of £265k or £340k? I can't work this out! Thanks in advance to anyone who can help with this.
«1

Comments

  • Jeremy535897
    Jeremy535897 Posts: 10,733 Forumite
    10,000 Posts Fifth Anniversary Photogenic Name Dropper
    Neither. It will be the sale proceeds less selling costs, less what you and your wife have paid for it in total (initial and subsequent payments), and if you sell in say December 2020, your ownership is say 93 months, of which 56 (47 occupation plus last 9 months deemed occupation) is exempt, so 37/93 of the gain is taxable, and you and your wife will presumably have £12,300 annual exemption each.
  • Thanks so much. So using your example above, would that mean that in paying £92,750 initially (35%) and a subsequent £221,000 (65%), it will be the sale price (minus costs) minus £313,750, multiplied by 37/93?
  • Jeremy535897
    Jeremy535897 Posts: 10,733 Forumite
    10,000 Posts Fifth Anniversary Photogenic Name Dropper
    Yes, assuming you sell in December 2020. I have used whole months to make the example easier, and I may have rounded the wrong way. I am also assuming it was your main residence for those 47 months. I should add that you have to report and pay any capital gains tax due within 30 days of completion. See
    https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax
  • oldbikebloke
    oldbikebloke Posts: 1,096 Forumite
    1,000 Posts Name Dropper
    taking your post at face value, do bear in mind that as your wife is co-owner you will need to each account for your respective shares when selling, so the calculation will need to be split between the pair of you. 
  • Jeremy535897
    Jeremy535897 Posts: 10,733 Forumite
    10,000 Posts Fifth Anniversary Photogenic Name Dropper
    edited 6 November 2020 at 10:31PM
    taking your post at face value, do bear in mind that as your wife is co-owner you will need to each account for your respective shares when selling, so the calculation will need to be split between the pair of you. 
    Yes indeed. That's why I mentioned two annual exemptions. There is a slight oddity in that I suspect you paid all the first 35% and then you jointly paid the other 65%? I assume you simply transferred the property into joint names at some time while you were living there as your main residence? Such a transfer would be at no gain, no loss, and so the practical outcome should be that the calculation is split equally between you, assuming it is owned 50:50. This would not be the case if:
    • it wasn't your main residence when you transferred part of your interest to your wife
    • it wasn't your main residence at some earlier time when you owned it all
    section 222(6) and (7) TCGA 1992.

  • Yes indeed. That's why I mentioned two annual exemptions. 
    my "your post" meant OP's post 
  • Jeremy535897
    Jeremy535897 Posts: 10,733 Forumite
    10,000 Posts Fifth Anniversary Photogenic Name Dropper

    Yes indeed. That's why I mentioned two annual exemptions. 
    my "your post" meant OP's post 
    Yes, I realised that, but it reminded me that there is the odd hole in main residence relief and spouse transfers that might apply here.
  • oldbikebloke
    oldbikebloke Posts: 1,096 Forumite
    1,000 Posts Name Dropper
    edited 7 November 2020 at 1:29PM
    Jeremy535897 said:
    Yes, I realised that, but it reminded me that there is the odd hole in main residence relief and spouse transfers that might apply here.

    agreed
    we assume ownership now 50/50 so effectively he has gifted 17.5% to her perfectly free of tax as we know under spousal transfer and she therefore "inherits" his purchase cost of the original 35% even though she never physically paid that
    https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64950

    https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg22200

    So to repeat what you have already said,  maths boils down to: combined costs x share owned (50/50?)
  • Jeremy535897
    Jeremy535897 Posts: 10,733 Forumite
    10,000 Posts Fifth Anniversary Photogenic Name Dropper
    edited 7 November 2020 at 1:40PM
    Jeremy535897 said:
    Yes, I realised that, but it reminded me that there is the odd hole in main residence relief and spouse transfers that might apply here.

    agreed
    we assume ownership now 50/50 so effectively he has gifted 17.5% to her perfectly free of tax as we know under spousal transfer and she therefore "inherits" his purchase cost of the original 35% even though she never physically paid that
    https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64950

    https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg22200

    So to repeat what you have already said,  maths boils down to: combined costs x share owned (50/50?)
    Most of the time that's true, but if for example the property was let out before the wife acquired an interest , presumably when the balance was paid (unlikely I know), the wife would have no main residence relief on her half.
  • oldbikebloke
    oldbikebloke Posts: 1,096 Forumite
    1,000 Posts Name Dropper
    edited 7 November 2020 at 10:20PM
    Jeremy535897 said:
    Yes, I realised that, but it reminded me that there is the odd hole in main residence relief and spouse transfers that might apply here.

    agreed
    we assume ownership now 50/50 so effectively he has gifted 17.5% to her perfectly free of tax as we know under spousal transfer and she therefore "inherits" his purchase cost of the original 35% even though she never physically paid that
    https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64950

    https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg22200

    So to repeat what you have already said,  maths boils down to: combined costs x share owned (50/50?)
    Most of the time that's true, but if for example the property was let out before the wife acquired an interest , presumably when the balance was paid (unlikely I know), the wife would have no main residence relief on her half.
    agreed, and as previously discussed, occupation is a primary requirement for a PRR claim.... if a property is let, it cannot be occupied!
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 350.9K Banking & Borrowing
  • 253.1K Reduce Debt & Boost Income
  • 453.5K Spending & Discounts
  • 243.9K Work, Benefits & Business
  • 598.8K Mortgages, Homes & Bills
  • 176.9K Life & Family
  • 257.2K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.