CGT on my brothers house move

bluearco_92

My brother and I bought a house 20 years ago for £80k. We jointly borrowed £72k on an interest only mortgage. The house has been my brothers main home for 20 years and he lives there alone. He wants to sell the house at £180k and buy a flat for £120k to live in as his main home and reduce the mortage joint interest only loan to £12k. My brother pays the interest only on the loan. Would I be liable for CGT on the sale?

Bookworm105

the size of loan, in whose name(s) it was, who paid it, and what happens to the loan afterwards are all irrelevant.
What does matter is can you prove from the outset that you were never going to get one penny of money when it was sold - if you can't then you have a beneficial interest in the property and it is that status which decides CGT exposure.

On the face of it, it appears you are the (joint) beneficial owner of the property.
So you are liable for CGT on your share of the sale as it has never been your main home 
Your brother is exempt from CGT on his share as it has always been his main home 

using your (rounded) figures:
Gross gain 180-80 = 100
assuming joint (ie 50/50) ownership your CGT would be 100/2 = 50,000 less allowance 3,000 = 47,000 taxable 

you would pay CGT at 18% and/or 24% depending on how much of the gain falls into the higher rate tax band based on the total of your net taxable income + your share of the gain 

theartfullodger

Both names on deeds?

Any documented agreement from 20 years ago about who owns what %%…?

Do you and/or brother have evidence from purchase of legal costs, plus of any capital improvements since - including receipts/bank records of payment?

btw CGT needs to he reported and paid within 60 days of sale - so you BOTH need to be prepared, paperwork neatly filed....

sheramber

Do you own another house?

Will the  new house be a joint purchase?

bluearco_92

Thank you all for the replies . I have checked and I have a 50% beneficail interest. Thank you for the CGT calculation Bookworm. 

sheramber

bluearco_92 said:

Thank you all for the replies . I have checked and I have a 50% beneficail interest. Thank you for the CGT calculation Bookworm. 

If you own anther property, such as your own house, you will need to consider the  additional Stamp Duty Land Tax.

Bookworm105

bluearco_92 said:

Thank you all for the replies . I have checked and I have a 50% beneficail interest. Thank you for the CGT calculation Bookworm. 

OK, in that case you will need to report and pay the CGT within 60 days of the completion date of the sale 
Tell HMRC about Capital Gains Tax on UK property or land if you’re not a UK resident - GOV.UK (www.gov.uk)

you yourself do not report anything relating to your brother's share 

Bookworm105

sheramber said:

bluearco_92 said:

Thank you all for the replies . I have checked and I have a 50% beneficail interest. Thank you for the CGT calculation Bookworm. 

If you own anther property, such as your own house, you will need to consider the  additional Stamp Duty Land Tax.

indeed since it appears the brother will still need a mortgage on the new flat where the OP will be party to the mortgage and therefore, by implication will be a co-owner of the new flat hence triggering additional rate SDLT

Lenders normally require all parties to a mortgage to be on the deeds of the property (and vice versa) so if brother needs a 12k mortgage then budget to pay the extra SDLT on purchase of new flat 

RAS

Looks like brother is going to need a larger mortgage, because a large chunk of the OP's share of the equity will be eaten up by taxes, although I doubt that he'd get a mortgage for such a low figure?

theartfullodger

Unfortunate, but the country needs the tax income