Working out CGT Gain on Jointly Held Property

jontay

Hi All, 

Long time lurker here wondering if anyone could offer any advice r.e. where the 'Gain' sits with the following scenario.  We will be getting professional financial advice, however as an avid reader of these forums i do like to do my best to develop an understanding myself if possible.

Hopefully I can get all of the pertinent information accoss in my 1st attempt, apologies if not.

• I purchased my 1st home in 2002 (on my own), Costing £82000

• In 2008 after meeting my partner (not Wife...) we moved home.  At that point my 1st home was remortgaged with Both of us becoming mortgage holders on it ('On trust as Joint Tenants'), with some equity being used as a deposit on our 'new' home together. 1st home at this point Valued at £130,000 for mortgage purposes
• Fast forward to now, with no change in scenario - we are about to sell the home purchased in 2002, obviously over that time period making a Taxable Gain.

What I'm hoping you can help me understand is for the two of us (say using the example of the house selling for £200000) at what point is the 'Gain' calculated. 

I believe for myself this would be the Gain obtained between Selling for £200000 and originally purchasing for £82000.

But what about my parner.  I can't seem to definively find the answer, is the starting point for her also £82000, as that was the last time the house was actually purchased ?  Or maybe £130000 at which point she gained an interest in it ? Or something else entirely ?

Thanks for taking the time to read this folks.

p00hsticks

My uhnjontay said:

I believe for myself this would be the Gain obtained between Selling for £200000 and originally purchasing for £82000.

Not an expert, but I would have thought that that would only be the case if the house had been in your sole name throughout; there needs to be some allowance made for the fact that from 2008 the property was effectively split between two of you and you only owned half. Otherwise you will end up paying more CGT between you than you would if it had stayed in one name, which doesn't sound right to me. Hopefully someone who is more knowledgeable than me will come along ....

silvercar

Happy to be corrected.

You owned all the property from 2002, when it was your PPR. You then transferred half to your partner in 2008. It was then sold in 2024.

As it was your PPR, you are exempt from CGT for the time it was your home and the last 9 months of ownership. Your partner owned half of it from 2008 to 2024, without ever living in it as her PPR, she has no exemptions. (Other than CGT allowance) so her gain would be half of 200k-130k= 70k/2 =35k less CGT allowance, charged at her marginal rate.

For your Calculation it is more complex. You have all of the gain for 6 years and half of the gain for 16 years. So your gain would be 6/22 plus 16/22 /2 = 14/22 of the gain of 118= 75k Then it was your PPR for 6/ 22 + the last 9 months. So you reduce the 75k to 52k. Less CGT allowance, charged at marginal rate. I’m thinking this is the way as the 130k valuation won’t figure as you didn’t sell it at that point, but I’m happy to be corrected.

you can both deduct selling costs and you can deduct buying costs.

jontay

[Deleted User] said:

What did partner pay for the half? It may have been valued at £130000 but there is no details of what was actually paid, if anything. Or am I missing something?

Thanks all for the comments so far, to answer this specifically - parner paid nothing at all.

silvercar

jontay said:

[Deleted User] said:

What did partner pay for the half? It may have been valued at £130000 but there is no details of what was actually paid, if anything. Or am I missing something?

Thanks all for the comments so far, to answer this specifically - parner paid nothing at all.

A gift at the current market value.

[Deleted User] said:

jontay said:

[Deleted User] said:

What did partner pay for the half? It may have been valued at £130000 but there is no details of what was actually paid, if anything. Or am I missing something?

Thanks all for the comments so far, to answer this specifically - parner paid nothing at all.

Maybe some of the current experts will comment but it would appear to me then that your partner is liable on a gain of £100000 less half selling costs less half the value of any improvements since. 

At the point of the gift, OP wouldn’t have any CGT as he’d been living in it the whole time. Logically, the partner would have acquired it at market value as a gift. From a tax point of view, it’s a real shame that the partner didn’t move in as her PPR before the sale.

[Deleted User]

silvercar said:

jontay said:

[Deleted User] said:

What did partner pay for the half? It may have been valued at £130000 but there is no details of what was actually paid, if anything. Or am I missing something?

Thanks all for the comments so far, to answer this specifically - parner paid nothing at all.

A gift at the current market value.

[Deleted User] said:

jontay said:

[Deleted User] said:

What did partner pay for the half? It may have been valued at £130000 but there is no details of what was actually paid, if anything. Or am I missing something?

Thanks all for the comments so far, to answer this specifically - parner paid nothing at all.

Maybe some of the current experts will comment but it would appear to me then that your partner is liable on a gain of £100000 less half selling costs less half the value of any improvements since. 

At the point of the gift, OP wouldn’t have any CGT as he’d been living in it the whole time. Logically, the partner would have acquired it at market value as a gift. From a tax point of view, it’s a real shame that the partner didn’t move in as her PPR before the sale.

Fair enough - deleted all posts!

silvercar

[Deleted User] said:

silvercar said:

jontay said:

[Deleted User] said:

What did partner pay for the half? It may have been valued at £130000 but there is no details of what was actually paid, if anything. Or am I missing something?

Thanks all for the comments so far, to answer this specifically - parner paid nothing at all.

A gift at the current market value.

[Deleted User] said:

jontay said:

[Deleted User] said:

What did partner pay for the half? It may have been valued at £130000 but there is no details of what was actually paid, if anything. Or am I missing something?

Thanks all for the comments so far, to answer this specifically - parner paid nothing at all.

Maybe some of the current experts will comment but it would appear to me then that your partner is liable on a gain of £100000 less half selling costs less half the value of any improvements since. 

At the point of the gift, OP wouldn’t have any CGT as he’d been living in it the whole time. Logically, the partner would have acquired it at market value as a gift. From a tax point of view, it’s a real shame that the partner didn’t move in as her PPR before the sale.

Fair enough - deleted all posts!

Wish you hadn’t deleted, I was looking at the logic of your calculation for OP, which seemed to have some merit.

[Deleted User]

silvercar said:

[Deleted User] said:

silvercar said:

jontay said:

[Deleted User] said:

What did partner pay for the half? It may have been valued at £130000 but there is no details of what was actually paid, if anything. Or am I missing something?

Thanks all for the comments so far, to answer this specifically - parner paid nothing at all.

A gift at the current market value.

[Deleted User] said:

jontay said:

[Deleted User] said:

What did partner pay for the half? It may have been valued at £130000 but there is no details of what was actually paid, if anything. Or am I missing something?

Thanks all for the comments so far, to answer this specifically - parner paid nothing at all.

Maybe some of the current experts will comment but it would appear to me then that your partner is liable on a gain of £100000 less half selling costs less half the value of any improvements since. 

At the point of the gift, OP wouldn’t have any CGT as he’d been living in it the whole time. Logically, the partner would have acquired it at market value as a gift. From a tax point of view, it’s a real shame that the partner didn’t move in as her PPR before the sale.

Fair enough - deleted all posts!

Wish you hadn’t deleted, I was looking at the logic of your calculation for OP, which seemed to have some merit.

Sorry - not everyone is pleasant - unfortunately. Good Luck!

Jeremy535897

silvercar said:

Happy to be corrected.

You owned all the property from 2002, when it was your PPR. You then transferred half to your partner in 2008. It was then sold in 2024.

As it was your PPR, you are exempt from CGT for the time it was your home and the last 9 months of ownership. Your partner owned half of it from 2008 to 2024, without ever living in it as her PPR, she has no exemptions. (Other than CGT allowance) so her gain would be half of 200k-130k= 70k/2 =35k less CGT allowance, charged at her marginal rate.

For your Calculation it is more complex. You have all of the gain for 6 years and half of the gain for 16 years. So your gain would be 6/22 plus 16/22 /2 = 14/22 of the gain of 118= 75k Then it was your PPR for 6/ 22 + the last 9 months. So you reduce the 75k to 52k. Less CGT allowance, charged at marginal rate. I’m thinking this is the way as the 130k valuation won’t figure as you didn’t sell it at that point, but I’m happy to be corrected.

you can both deduct selling costs and you can deduct buying costs.

A couple of observations. Firstly, we are assuming both that the partner never occupied the house as a main residence (which does seem to be what OP says, but best to check) and secondly we are assuming that they are not civil partners, merely cohabitants.
More importantly, the way you work out OP's gain is £100,000 less £41,000 = £59,000 (to adjust for acquisition costs, selling costs and improvements), and then you allow roughly 7/22 as main residence relief (actual occupation plus last 9 months). This should be done to the nearest month when doing the actual calculation. On my estimate, the taxable gain for OP is £59,000 x 15/22 = £40,000. See section 222(7) TCGA 1992.

silvercar

Jeremy535897 said:

silvercar said:

Happy to be corrected.

You owned all the property from 2002, when it was your PPR. You then transferred half to your partner in 2008. It was then sold in 2024.

As it was your PPR, you are exempt from CGT for the time it was your home and the last 9 months of ownership. Your partner owned half of it from 2008 to 2024, without ever living in it as her PPR, she has no exemptions. (Other than CGT allowance) so her gain would be half of 200k-130k= 70k/2 =35k less CGT allowance, charged at her marginal rate.

For your Calculation it is more complex. You have all of the gain for 6 years and half of the gain for 16 years. So your gain would be 6/22 plus 16/22 /2 = 14/22 of the gain of 118= 75k Then it was your PPR for 6/ 22 + the last 9 months. So you reduce the 75k to 52k. Less CGT allowance, charged at marginal rate. I’m thinking this is the way as the 130k valuation won’t figure as you didn’t sell it at that point, but I’m happy to be corrected.

you can both deduct selling costs and you can deduct buying costs.

A couple of observations. Firstly, we are assuming both that the partner never occupied the house as a main residence (which does seem to be what OP says, but best to check) and secondly we are assuming that they are not civil partners, merely cohabitants.
More importantly, the way you work out OP's gain is £100,000 less £41,000 = £59,000 (to adjust for acquisition costs, selling costs and improvements), and then you allow roughly 7/22 as main residence relief (actual occupation plus last 9 months). This should be done to the nearest month when doing the actual calculation. On my estimate, the taxable gain for OP is £59,000 x 15/22 = £40,000. See section 222(7) TCGA 1992.

222(7) (b) seems to suggest that if they got married before sale, she would acquire all his PPR and reduce her tax bill. @Jeremy535897 is that right?

Jeremy535897

silvercar said:

Jeremy535897 said:

silvercar said:

Happy to be corrected.

You owned all the property from 2002, when it was your PPR. You then transferred half to your partner in 2008. It was then sold in 2024.

As it was your PPR, you are exempt from CGT for the time it was your home and the last 9 months of ownership. Your partner owned half of it from 2008 to 2024, without ever living in it as her PPR, she has no exemptions. (Other than CGT allowance) so her gain would be half of 200k-130k= 70k/2 =35k less CGT allowance, charged at her marginal rate.

For your Calculation it is more complex. You have all of the gain for 6 years and half of the gain for 16 years. So your gain would be 6/22 plus 16/22 /2 = 14/22 of the gain of 118= 75k Then it was your PPR for 6/ 22 + the last 9 months. So you reduce the 75k to 52k. Less CGT allowance, charged at marginal rate. I’m thinking this is the way as the 130k valuation won’t figure as you didn’t sell it at that point, but I’m happy to be corrected.

you can both deduct selling costs and you can deduct buying costs.

A couple of observations. Firstly, we are assuming both that the partner never occupied the house as a main residence (which does seem to be what OP says, but best to check) and secondly we are assuming that they are not civil partners, merely cohabitants.
More importantly, the way you work out OP's gain is £100,000 less £41,000 = £59,000 (to adjust for acquisition costs, selling costs and improvements), and then you allow roughly 7/22 as main residence relief (actual occupation plus last 9 months). This should be done to the nearest month when doing the actual calculation. On my estimate, the taxable gain for OP is £59,000 x 15/22 = £40,000. See section 222(7) TCGA 1992.

222(7) (b) seems to suggest that if they got married before sale, she would acquire all his PPR and reduce her tax bill. @Jeremy535897 is that right?

I fear not, as the disposal would not have been between husband and wife, as they were not married at the time.