Capital Gains for Married Couple

Silverstar

Hi everyone, I'm hoping for a bit of info here as I'm struggling to figure it out myself! 

My spouse and I got married in October 2023. We each own a flat, and we are currently in the process of getting mine ready to sell. My flat is in my name, their flat is in their name. 

Now that we are married, does this mean that I will need to pay capital gains tax on the sale of my property? 

If so, as I (just about) fall into the higher rate tax bracket, how do I work out how much CGT I would pay? 

Is there anything I need to do or can do to mitigate this at all? Our long term plan is to sell my place, live in my spouse's place for another year or so, then sell that one and buy a house with the money from both flats. 

Any useful information gratefully received. 

Keep_pedalling

If your flat was your primary residence for the period of ownership before you got married then you are not going to have a CGT liability if you sell it now. 

Was this the case? If not can you give us some more details, purchase date and price, current value, period of occupation, was it rented out while not occupied by you?

_Penny_Dreadful

Silverstar said:

Hi everyone, I'm hoping for a bit of info here as I'm struggling to figure it out myself! 

My spouse and I got married in October 2023. We each own a flat, and we are currently in the process of getting mine ready to sell. My flat is in my name, their flat is in their name. 

Now that we are married, does this mean that I will need to pay capital gains tax on the sale of my property? 

If so, as I (just about) fall into the higher rate tax bracket, how do I work out how much CGT I would pay? 

Is there anything I need to do or can do to mitigate this at all? Our long term plan is to sell my place, live in my spouse's place for another year or so, then sell that one and buy a house with the money from both flats. 

Any useful information gratefully received. 

• When did your flat cease to be your only or main residence? 
• When did you purchase your flat?
• How much did you purchase your flat for?
• How much do you expect to sell your flat for?

Silverstar

Hi both, thanks you. It was my primary residence until we got married, yes. I purchased it in 2014 for £131000, and I think it will sell for somewhere between £180000 and £200000 (flats in the area I'm looking at are a bit volatile at the moment so I'm not sure exactly - we've got a bit of work to do on it before I put it on the market so I haven't yet had it valued).

Bookworm105

prior to the marriage you owned and lived in your place, and she in hers. Therefore you each, independently, had your own main homes and each property was exempt from CGT for the period of time it held that status.

at the point you got married (Oct 23) you are treated as a single "unit" which is entitled to have only one main residence, which must be the same property for both of you. Therefore from that date your own property became liable for CGT as the "unit" does not live in it

However, because it was once your main residence, you are allowed to add on the final 9 months of ownership to the period of exempt main residence even though that overlaps with the subsequent marriage. It does not matter what use the property had in those 9 months eg let out or left it empty.

As sole owner the CGT is wholly yours alone and must be calculated in months not years, but for illustration only let us assume you purchased in Jan 2014 and sell it in Dec 24 (technically the date of sale is the date you exchange contracts, not the completion date)

Total ownership period: Jan 2014 - Dec 2024 = 132 months

Gross Gain £200,000 - £131,000 (- costs of buying and selling ie.legal fees, EA commissions, EPC if required) = £69,000

period of main residence: Jan 14 to Oct 23 marriage = (approx.) 118 months + final 9 = 127 months

period not main residence:  ownership – exempt period 132-127 = 5 months

Gross Taxable gain = 69,000 x 5/132 = 2,614

Net taxable gain (gross taxable gain - CGT allowance £3,000) 2,614 - 3,000 = 0

No tax to pay (and that is without including buying and selling costs!)

PS do not under any circumstances allow someone to suggest you use spousal transfer rules to make her a co owner. She never lived in it, therefore she has no entitlement to the historic main residence exemption before marriage. Even if "the unit" reoccupies it now, then her entitlement would be from that date, not backdated to original purchase date. That would mean as a couple you'd lose a huge part of the exemption