House sale and proceeds. Please help

jojo2677

I hope you can help on my below questions for my husband who has just sold- at point of exchange- his house in his name.  Our current home is in my name.

Bought for 230k in 2012 and just sold for 575k . 

Mortgage 110k remaining. He is looking for advice on what to do with circa 400k next year. 

He has a mortgage with Barclays - not great rate of 6% - and they may allow him to carry it on re next home purchase. This may be ideal re eligibility as only has 1 years accounts as a self employed builder- previously he went into liquidation as a Ltd so not sure on that impact.

Or we could put down a large deposit and go elsewhere. 

Would he pay any capital gains tax? He had previously rented it out but now bills back in his name...confused as to what he may end up paying if at all in fees.. 

Re him buying another property- wise to put in my stepkids name? Or in his again as I prefer? We may later sell marital home and perhaps get a joint mortgage later. Confused as how a property in his name and then one in both potentially impacts later...

He has 2 adult kids and we have 1 toddler - he wishes to leave money to his 3 kids too as we need to make a will and ideally from this/his house sale proceeds.

Also as we ponder..where best to put the house proceeds- savings plan or?  for upto a year as we travel and plan and get the best return. Keen to maximise return and safely.

Really hope you can help as we can't afford to mess this up!

Kind regards Jo

BarelySentientAI

I can't answer all your points, but those I can:

jojo2677 said:

Would he pay any capital gains tax? He had previously rented it out but now bills back in his name...confused as to what he may end up paying if at all in fees.. 

Almost certainly yes.  A married couple have one private residence between them eligible for PRR.  It won't be the one that he owned under his own name and didn't live in.  Has he ever lived in that house as his main residence?

jojo2677 said:

Re him buying another property- wise to put in my stepkids name?

Then they would never be first time buyers in the future.

jojo2677 said:

Also as we ponder..where best to put the house proceeds- savings plan or?  for upto a year as we travel and plan and get the best return. Keen to maximise return and safely.

There is some additional protection over the usual limits for money (£85k per licence) as a result of a house sale, but that only lasts six months.  With NS&I I think there is total protection.

amnblog

Sounds like £399,000 and the help of a good accountant would be better than £400,000 and a massive mistake

Keep_pedalling

amnblog said:

Sounds like £399,000 and the help of a good accountant would be better than £400,000 and a massive mistake

It will be considerably less than that after selling costs  and CGT has been paid.

user1977

jojo2677 said:

Re him buying another property- wise to put in my stepkids name? 

You can't just put a property into somebody else's name. What's the plan for this property and do the stepkids want to own it? If they are becoming landlords, do they understand what's involved in that? Do they already own property?

Keep_pedalling

What is the point of selling up and buying another property rather than looking at alternative investments? Getting some of cash into pensions would be far more tax efficient.

Putting a new property in his children’s name would effectively be gifting it to them.

MWT

amnblog said:

Sounds like £399,000 and the help of a good accountant would be better than £400,000 and a massive mistake

100% this.

It may cost more than £1,000 in the end but getting some advice now is money well spent instead of half-thought out schemes involving the kids etc. as this could all go very badly wrong and not even achieve the initial aims, whatever they are...

jojo2677

Hi all and thank you.
Am thinking we can swerve CGT as it could be seen as his main residence.... how is that checked?!
Yes re getting financial advice .
Wondered if anyone knew a secure high interest plan for a year at least as we look at buying or investing.

Better to have a new property in both names or?  Penalties of that?

BarelySentientAI

jojo2677 said:

Am thinking we can swerve CGT as it could be seen as his main residence.... how is that checked?!

"Swerving" tax liability tends to go badly.   The rule says "married couples and civil partners can only count one property as their main home at any one time."

I think you would struggle to declare a house that you have never lived in as your main home.

MWT

jojo2677 said:

Am thinking we can swerve CGT as it could be seen as his main residence.... how is that checked?!

Please don't do this, take advice on what his actual liability is, as I hope he has been declaring the rental income, so there is a paper-trail which leads to tax evasion if he doesn't go by the rules.

If the property was his main residence for a few years then rented for a short time then the exposure to CGT will be low as it is mitigated by PRR which is a tax relief designed to take into account the period of actual occupation as his main residence.

It would be very stupid to pick tax evasion over a legitimate route to reduce the CGT liability.