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Reducing CGT due on sale of property

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I'm selling a property and am now realising that CGT is going to come into play.  I purchased in December of 2003, moved out in January 2013, the property has been let since.  I bought for £159k and currently considering an offer of £215k.  To be honest I hadn't realised the impact that CGT might have on this sale, but it looks like I'll have about £6k to pay in tax.  We've been counting on this sale to pay off a significant portion of our residential mortgage, and it feels like every penny kind of counts here!

I have always been the sole owner of the property, but I am also married.  It appears that if I give half of the property to my husband, he will get his own CGT allowance and therefore we could share the gain and reduce the tax significantly.  From what I had read it seems that as we are married the "ownership" date would be the same for both of us, so instead of a £26k taxable gain for me it would be £13k each?

Is it too late in the day to have my husband added as a co-owner?  I'm concerned about the timelines and it causing an issue with the buyer's mortgage etc. as I've often seen the "6 months of ownership" rule thrown about for mortgage approval but I'm not sure if that would count when just adding one owner?

Also trying to figure out the "costs" that I can deduct from this purchase - for example we had to pay out £12k in 2018 for repairs to the building, but it seems like that would just be maintenance rather than an improvement?  I will also need to try and find out what all the costs were when I purchased - hopefully I have it all filed away!

TIA for any help here.
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Comments

  • DE_612183
    DE_612183 Posts: 3,818 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    Have you got an estimated value of the property in 2013 - I think thats when the CGT will kick in from.

    I think this combined with the 12k costs ( don't forget to add in your solicitors costs at both ends ) will make your CGT go away...
  • p00hsticks
    p00hsticks Posts: 14,451 Forumite
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    edited 18 September 2024 at 11:44AM
    DE_612183 said:
    Have you got an estimated value of the property in 2013 - I think thats when the CGT will kick in from.

    Your thinking is incorrect.

     The CGT calculation will be based on the appreciation in value over the entire period of ownership from December 2003 until when the property is sold, with a proportional deduction for the number of months in which it was the OP's main residence (plus potential deductions for buying & selling costs and improvements).

     Any rise in value is assumed to be linear over the whole period of ownership.
  • DE_612183
    DE_612183 Posts: 3,818 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    edited 18 September 2024 at 11:47AM
    DE_612183 said:
    Have you got an estimated value of the property in 2013 - I think thats when the CGT will kick in from.

    Your thinking is incorrect.

     The CGT calculation will be based on the appreciation in value over the entire period of ownership from December 2003 until when the property is sold, with a proportional deduction for the number of months in which it was the OP's main residence (plus potential deductions for buying & selling costs and improvements).

     Any rise in value is assumed to be linear over the whole period of ownership.
    Thanks @poohsticks I didn't realise that.

    There is a calculator on the HMRC website.
  • If you are already selling you have missed the boat on doing this.
  • If you are already selling you have missed the boat on doing this.
    Obviously I've been living under a rock, because I hadn't realised the changes in CGT allowance over the last few years.  I wanted to clarify if it really is too late, as it seems even if my husband is co-owner from now until the sale goes through in 6-8 weeks it would help with the CGT bill.  I just don't know if that would cause issues with a mortgage for the buyer.
  • Jeremy535897
    Jeremy535897 Posts: 10,733 Forumite
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    I doubt the effort of transferring an interest in the property to your husband would be worthwhile just for the annual exemption. It will also be affected by what tax rate each of you would pay.
    https://www.gov.uk/capital-gains-tax/rates
  • silvercar
    silvercar Posts: 49,611 Ambassador
    Part of the Furniture 10,000 Posts Academoney Grad Name Dropper
    If you are already selling you have missed the boat on doing this.
    Obviously I've been living under a rock, because I hadn't realised the changes in CGT allowance over the last few years.  I wanted to clarify if it really is too late, as it seems even if my husband is co-owner from now until the sale goes through in 6-8 weeks it would help with the CGT bill.  I just don't know if that would cause issues with a mortgage for the buyer.
    Family member just bought a house and the sellers did exactly this. (For SDLT reasons rather than CGT, but the principle is the same). They did it when the property was on the market. It was a query from the solicitor as to why the deeds had been changed, the sellers replied 'to put the property into the correct ownership to reflect the actual situation' (whatever that is meant to mean!). No problem from the lender or the solicitor.

    You would gain a second CGT allowance, but that is only £3,000. Far more important is both your marginal rates of tax.
    I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.
  • silvercar said:
    If you are already selling you have missed the boat on doing this.
    Obviously I've been living under a rock, because I hadn't realised the changes in CGT allowance over the last few years.  I wanted to clarify if it really is too late, as it seems even if my husband is co-owner from now until the sale goes through in 6-8 weeks it would help with the CGT bill.  I just don't know if that would cause issues with a mortgage for the buyer.
    Family member just bought a house and the sellers did exactly this. (For SDLT reasons rather than CGT, but the principle is the same). They did it when the property was on the market. It was a query from the solicitor as to why the deeds had been changed, the sellers replied 'to put the property into the correct ownership to reflect the actual situation' (whatever that is meant to mean!). No problem from the lender or the solicitor.

    You would gain a second CGT allowance, but that is only £3,000. Far more important is both your marginal rates of tax.
    And the amount of the marginal rate band left is equally if not more important.

    Being a basic rate payer who has used virtually all the basic rate band will push most of the gain that is taxed I to the higher CGT rate.
  • silvercar said:
    If you are already selling you have missed the boat on doing this.
    Obviously I've been living under a rock, because I hadn't realised the changes in CGT allowance over the last few years.  I wanted to clarify if it really is too late, as it seems even if my husband is co-owner from now until the sale goes through in 6-8 weeks it would help with the CGT bill.  I just don't know if that would cause issues with a mortgage for the buyer.
    Family member just bought a house and the sellers did exactly this. (For SDLT reasons rather than CGT, but the principle is the same). They did it when the property was on the market. It was a query from the solicitor as to why the deeds had been changed, the sellers replied 'to put the property into the correct ownership to reflect the actual situation' (whatever that is meant to mean!). No problem from the lender or the solicitor.

    You would gain a second CGT allowance, but that is only £3,000. Far more important is both your marginal rates of tax.
    That's interesting to hear your personal experience, thank you.

    We are both higher (Scottish) rate tax payers. 
    I nearly did change the ownership a couple of years back due to income tax purposes - I was pushing the top end of the higher rate tax band with the rental income being added to my employment income, whereas my husband is at the lower end of the tax band and realistically any "profit" was being added to the household pot - but I never got around to it for some reason.  Kicking myself for it now!
     
  • silvercar
    silvercar Posts: 49,611 Ambassador
    Part of the Furniture 10,000 Posts Academoney Grad Name Dropper
    silvercar said:
    If you are already selling you have missed the boat on doing this.
    Obviously I've been living under a rock, because I hadn't realised the changes in CGT allowance over the last few years.  I wanted to clarify if it really is too late, as it seems even if my husband is co-owner from now until the sale goes through in 6-8 weeks it would help with the CGT bill.  I just don't know if that would cause issues with a mortgage for the buyer.
    Family member just bought a house and the sellers did exactly this. (For SDLT reasons rather than CGT, but the principle is the same). They did it when the property was on the market. It was a query from the solicitor as to why the deeds had been changed, the sellers replied 'to put the property into the correct ownership to reflect the actual situation' (whatever that is meant to mean!). No problem from the lender or the solicitor.

    You would gain a second CGT allowance, but that is only £3,000. Far more important is both your marginal rates of tax.
    That's interesting to hear your personal experience, thank you.

    We are both higher (Scottish) rate tax payers. I nearly did change the ownership a couple of years back due to income tax purposes - I was pushing the top end of the higher rate tax band with the rental income being added to my employment income, whereas my husband is at the lower end of the tax band and realistically any "profit" was being added to the household pot - but I never got around to it for some reason.  Kicking myself for it now!
     
    So the gain is £3,000 x your marginal rate. (is that 42%? = £1260).  The cost is the legal costs of doing it, plus the hassle factor.
    I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.
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