Capital Gains Tax

Hoager

I plan to sell a property shortly and have been told that although I've rented it out, because it's the only property in my name, for the purposes of Capital Gains Tax it counts as my home and therefore no Capital Gains Tax is due on it. I can't find any reference to this on the HMRC pages, but they're not very user-friendly. Is this a mad fantasy or is it actually the case?

saajan_12

Hoager said:

I plan to sell a property shortly and have been told that although I've rented it out, because it's the only property in my name, for the purposes of Capital Gains Tax it counts as my home and therefore no Capital Gains Tax is due on it. I can't find any reference to this on the HMRC pages, but they're not very user-friendly. Is this a mad fantasy or is it actually the case?

Fantasy. The number of properties is somewhat relevant to other taxes eg SDLT, but for CGT its about where you acutally live. You get relief for the proportion of time you actually live there, plus some other allowances and then pay tax on the rest of the time. If you give dates and amounts then we can help further. 

Hoager

Thank you very much for you help. I can handle the calculations, but if there was a slim chance I could legally not have to pay tax it was worth asking.

macman

You may well not have to pay any CGT, but you'll need to crunch the numbers to tell.

dimbo61

You have a CGT allowance of £12,300 
but as others have said you need to put the figures in the government website or speak to your accountant. 

https://www.gov.uk/tax-sell-property/work-out-your-gain

ashleyj722

I'm facing the same dilemma.  From what I can gather you can reduce the CGT significantly by putting a spouse on your house deeds to gain their CGT allowance.  Disposing part of the property over two tax years or transferring the house to a company and hence you pay the corporation tax of 20% instead of the rate.  You can also claim losses such as improvements or conveyancing/estate agent fees.  Plus be careful if you sell the house at a discount as they may charge you for the market value rather than the price you actually sold it at. 

JadEle

ashleyj722 said:

I'm facing the same dilemma.  From what I can gather you can reduce the CGT significantly by putting a spouse on your house deeds to gain their CGT allowance.  Disposing part of the property over two tax years or transferring the house to a company and hence you pay the corporation tax of 20% instead of the rate.  You can also claim losses such as improvements or conveyancing/estate agent fees.  Plus be careful if you sell the house at a discount as they may charge you for the market value rather than the price you actually sold it at. 

I am in a similar position...can you expand on how this would work, how do you sell it over two tax years?

macman

I suppose you could in theory devise a 'split completion' whereby you sell a property 50% on 5/4/x and 50% on 6/4/x, but there could be all sorts of legal issues with this, and it would only apply to a cash buyer who understands why you are doing it and is prepared to co-operate, no doubt for a consideration which might wipe out the saving anyway.
The transfer to a spouse is a much simpler approach, if you have one.

AlexMac

macman said:

..The transfer to a spouse is a much simpler approach, if you have one.

Agree; I have a Buy To Let property, bought long before I married, so last time we were buying a house to live in, I just got the solicitor to transfer ownership to our joint names .

I'm sure that transfers between spouses don't incurr CGT, but I'm not so sure if there's a SDLT liability?  Not an issue as the half share (if it worked like that) was under the £125k zero SDLT threshold.  I'm also unsure if  it matters whether you go for it as "joint tenants" (each owning the lot) rather than "tenants in common" (defined shares).

I suspect that if you can get past the adverts on Google, you could research this as a DIY conveyance, but we just used our solicitor as they were doing the sale/purchase of our own primary resicence; and it only cost a couple of hundred quid, but will be a legit way to save stacks when we eventually sell.

ashleyj722

AlexMac said:

macman said:

..The transfer to a spouse is a much simpler approach, if you have one.

Agree; I have a Buy To Let property, bought long before I married, so last time we were buying a house to live in, I just got the solicitor to transfer ownership to our joint names .

I'm sure that transfers between spouses don't incurr CGT, but I'm not so sure if there's a SDLT liability?  Not an issue as the half share (if it worked like that) was under the £125k zero SDLT threshold.  I'm also unsure if  it matters whether you go for it as "joint tenants" (each owning the lot) rather than "tenants in common" (defined shares).

I suspect that if you can get past the adverts on Google, you could research this as a DIY conveyance, but we just used our solicitor as they were doing the sale/purchase of our own primary resicence; and it only cost a couple of hundred quid, but will be a legit way to save stacks when we eventually sell.

The SDLT liability depends on the outstanding mortgage left and how much the property is worth.  So if 50% of the value of the property is below the 125K mark, you don't pay anything.

bargainhunter382

I am the only name on deeds for a mortgaged second property which both my husband and I have lived in for 20% of the time I’ve owned it (20 years) so will get private residents relief. 

He is retired (10% gain) and I’m a high rate tax payer (28% now 24% taxable gain woo hoo) but I’ve been advised that there’s no point in transferring his name onto deeds to split the gain (and all the hassle that brings) as the benefit of sharing the CGT burden only applies from the date of adding his name to the deeds. Is this correct? We will sell it in the next couple of months.