Private Residence Relief and CGT

thor

I have jointly owned a house with my brother since 1998 and lived in it with him until 2021 when I moved out to rented property. I have been intending to give him my share of the house but have been put off by the tax implications as the house value has risen by roughly £100000 and I was expecting I would have to pay CGT on half of this. Recently however, I have become aware of 'Private Residence Relief' where you can get a proportional discount depending on how long you have lived in property so I have done the following calculation:

Proportion of time lived in property compared to time owning property = 23 years/26 years = 0.88

Therefore relief = 0.88x £50000=44230

So if the personal relief is £6000 then I would have no need to pay any CGT.

Obviously these are very rough calculations but the actual value will be in the same ballpark.

Does this seem OK. Will I be able to transfer to my brother so that he has full ownership and be liable for either zero or very little CGT?

Keep_pedalling

You need to use months rather than years in your calculations and you can also claim the last 9 months of ownership as part of PRR.

The allowance is now £3k not £6k.

Bookworm105

as above, because it was once your main home you are also entitled to the final 9 months of ownership given you were not actually living there during that final period 

for the sake of your numbers (using months not years):
PRR period 23 years 9 months = 285 months
ownership 26 years = 312 months 

gross gain your share 100,000 ./ 2 = 50,000 
PRR:  50,000 x (285/312) = 45,673 
Taxable gain 50,000 - 45,673 - 3,000 = 1,327

Tax is payable on 1,327 at either 18% and/or 28% depending on your tax bracket (including that gain)
best case scenario, all at 18%, tax payable is around £238
worst case scenario, all at 28%, tax payable is around £372

[Deleted User]

Bookworm105 said:

as above, because it was once your main home you are also entitled to the final 9 months of ownership given you were not actually living there during that final period 

for the sake of your numbers (using months not years):
PRR period 23 years 9 months = 285 months
ownership 26 years = 312 months 

gross gain your share 100,000 ./ 2 = 50,000 
PRR:  50,000 x (285/312) = 45,673 
Taxable gain 50,000 - 45,673 - 3,000 = 1,327

Tax is payable on 1,327 at either 18% and/or 28% depending on your tax bracket (including that gain)
best case scenario, all at 18%, tax payable is around £238
worst case scenario, all at 28%, tax payable is around £372

Not too much to worry about. Presumably legal fees (50% thereof) at time of purchase could also be deducted and op’s share of any capital improvements. 

Could well be that there would be no chargeable gain at all and no need to even declare it if the op does not complete self-assessment returns for other reasons.