Capital Gains Tax Confusion

clare19811

We became "accidental landlords" about 8 years ago and are planning to sell our property early next year. I know we'll have to pay CGT, but I'm really struggling to get even a clue on how much it will likely be.
My husband bought the property in 1992 for £32,500.
He remortgaged in 2007 and I was added onto the mortgage and took out an extra £26,000 for home improvements - the house was valued at £92,500 at the time. 
We've let the property for roughly 8 years.
The house is now roughly worth £120,000.
I've no idea where to even begin with working this out. Will it be calculated from when he first bought the house or from when we owned it jointly? I'm guessing it will be the former but then will he be solely liable for the CGT?
Thanks in advance.

leonj

About 11k, you can check here https://www.tax.service.gov.uk/calculate-your-capital-gains/resident/properties/

clare19811

leonj said:

About 11k, you can check here https://www.tax.service.gov.uk/calculate-your-capital-gains/resident/properties

Thanks, I've tried to use that but it doesn't solve my issue about whether he'll be solely liable for the cgt as he initially bought it then I was added on? 

clare19811

I was also confused by the two different sections called residents relief and lettings relief and what the difference is between them, the help links both go to the same document and I couldn't understand what I should be putting in each one! 

[Deleted User]

You each have your own liabilities from when you became owners. Your husband isn’t solely liable just because he bought the property first. 

theartfullodger

The confusion is surely in believing you're accidental landlords.  Accidentally signed all those papers, accidentally spent all those profits, accidentally declared then paid all that income tax?

There's an online CGT calculator on HMRC's SA website where you input your numbers and it tells you what you owe. Currently (20/21)you must declare within 30 days. (Did it October).  I'm expecting CGT rates to increase to pay for Bozo's handling of Covid and Brex****.

AdrianC

What was the value in 2007 when he transferred half the asset to you?

clare19811

AdrianC said:

What was the value in 2007 when he transferred half the asset to you?

£92,500 according to the documents from the mortgage provider. At that point we were still living in the property.

clare19811

Lover_of_Lycra said:

You each have your own liabilities from when you became owners. Your husband isn’t solely liable just because he bought the property first. 

He became an owner in 1992, I was added 2007, so I'm unsure how to work it out, maybe this is one to leave until we've sold and get help from an accountant.

clare19811

theartfullodger said:

The confusion is surely in believing you're accidental landlords.  Accidentally signed all those papers, accidentally spent all those profits, accidentally declared then paid all that income tax?

There's an online CGT calculator on HMRC's SA website where you input your numbers and it tells you what you owe. Currently (20/21)you must declare within 30 days. (Did it October).  I'm expecting CGT rates to increase to pay for Bozo's handling of Covid and Brex****.

Just to clear this up - we have consent to let, we've paid tax every year but we haven't yet seen any profits to spend so no we haven't "accidentally spent all those profits", there is equity in the house though so that will be used to pay the CGT.

Apologies if you took offence at the term "accidental", we were in a difficult position at the time but it's all been done above board. We don't own another property, we currently rent where we live, I'm not sure all of this is relevant or helps answer my question but thought your comment warranted a reply.

As I mentioned previously, I've used the form but I'm still unsure about how to work it out as we've both owned the house for different lengths of time.

AdrianC

clare19811 said:

AdrianC said:

What was the value in 2007 when he transferred half the asset to you?

£92,500 according to the documents from the mortgage provider. At that point we were still living in the property.

Right, so his CGT liability is the gain from 50% of £32,500 in 1992 to 50% of £120,000 in 2020, pro-rata'd for the period you've not been living there - so ((2020-2012)-9mo transition)/(2020-1992)

£87,500/2 x (7.25/28) = £43,750 x .26 = £11,375. That's below his annual CGT allowance of £12,300.

Yours is the gain from 50% of £92,500 in 2007 to 50% of £120,000 in 2020, subject to a similar pro-rata...  ((2020-2012)-9mo transition)/(2020-2007)

£27,500/2 x (7.25/13) = £13,750 x  .56 = £7,700. Again, below CGT allowance.

So as long as neither of you have other gains in the year that take you over the threshold, there's no tax liability.