Capital Gains Tax own 1 house but living in rented house.

rjspaul87

Hi all. Firstly I think we can all agree that working out capital gains tax is confusing when you've got different elements that could make a difference and need to be factored in to the calculations.

Anyway this is in regards to my mum who is needing to pay CGT on the property she is selling and we are trying to work out what period of time she gets private residents relief. She bought her house in 2006, she married in 2013 and from 2015 I believe she started letting out her house. Now we read that when you marry and each person owns a home then one of the properties needs to become the main residence and the other you would need to pay CGT on when selling. This is fine, her husband home was where she lived so she would get relief from 2006 up to when she married, the fact she letted it out becomes irrelevant I believe. However her husband does not own his house, it's rented. So does the fact that together they only own one house mean that is their only residence and she only has to pay CGT for the period it was let out or does it not matter that her husbands house is rented and not owned? Surely as they are not gaining because they are paying rent should factor in, in fact I don't know the figures but the rent she got for her house probably was used partly or fully to pay rent on her husbands house.

Apologies for long post and if it's confusing, not as confusing as we are finding this process though. If only you could submit all your details and hmrc then tell you what you need to pay.

Brie

a residence is where you live.  so it does not matter that they were living in rented accommodation that is what would be considered their main residence.  In the same way that they would need to pay council tax for that rented place rather than the home that was being let to someone else.  

As to the how much relief there is for her living in her home pre 2015 I do not know.

p00hsticks

Brie said:

As to the how much relief there is for her living in her home pre 2015 I do not know.

There's a calculator that will help here
Tax when you sell your home: Private Residence Relief - GOV.UK (www.gov.uk)

You need to work in months not years - so what month of the year she bought it, when she moved out and when she sold it. You use the price she originally paid and the price she sells for, and you can deduct buying and selling costs to work out the total gain and then a proprtion of that is subject to CGT depending on how many months it was her PPR. 
 
Note that if there is any CGT due it has to be paid within 60 days of exchange of contracts. 

rjspaul87

Thanks for the response and yes we've seen that calculator thanks. We were thinking the same way but considering she has to work out herself how much to pay we need to be sure. The only thing that confused me and the reason why I'm asking is to do with what I perceive to be different between ownership and residency.

It says that when you marry you should nominate which house will be the main residence but you don't have to live at said main residence but because she didn't nominate hmrc will decide themselves which was the main residence and they will decide that based on where she actually spent her time I'm sure.

Also the wording on the gov website made me doubt what it meant:
"If, when you married or registered as civil partners, you each OWNED a residence and you’ve continued to use both residences, you can nominate jointly which is to be the main residence". Obviously it's just an example and they don't clarify anywhere whether it's the same for owning and renting, sometimes it's worded owned and sometimes residence.

As I said it's just to do with working out how much rather than if she has to pay. When she married in 2013 she didn't change how many properties she owned, she just lived somewhere else. There's also the 3 years living away from your main residence that you're allowed as well.

sheramber

it does not matter that she only owned one house.  She is liable to CGT  for the period it was not her main residence.
PPR will be due for the period from buying it until she moved out plus the final 9 months.

sheramber

rjspaul87 said:

Thanks for the response and yes we've seen that calculator thanks. We were thinking the same way but considering she has to work out herself how much to pay we need to be sure. The only thing that confused me and the reason why I'm asking is to do with what I perceive to be different between ownership and residency.

It says that when you marry you should nominate which house will be the main residence but you don't have to live at said main residence but because she didn't nominate hmrc will decide themselves which was the main residence and they will decide that based on where she actually spent her time I'm sure.

Also the wording on the gov website made me doubt what it meant:
"If, when you married or registered as civil partners, you each OWNED a residence and you’ve continued to use both residences, you can nominate jointly which is to be the main residence". Obviously it's just an example and they don't clarify anywhere whether it's the same for owning and renting, sometimes it's worded owned and sometimes residence.

As I said it's just to do with working out how much rather than if she has to pay. When she married in 2013 she didn't change how many properties she owned, she just lived somewhere else. There's also the 3 years living away from your main residence that you're allowed as well.

There's also the 3 years living away from your main residence that you're allowed as well.

Yuo normally need to move back into the house to claim this relief.

rjspaul87

sheramber said:

rjspaul87 said:

Thanks for the response and yes we've seen that calculator thanks. We were thinking the same way but considering she has to work out herself how much to pay we need to be sure. The only thing that confused me and the reason why I'm asking is to do with what I perceive to be different between ownership and residency.

It says that when you marry you should nominate which house will be the main residence but you don't have to live at said main residence but because she didn't nominate hmrc will decide themselves which was the main residence and they will decide that based on where she actually spent her time I'm sure.

Also the wording on the gov website made me doubt what it meant:
"If, when you married or registered as civil partners, you each OWNED a residence and you’ve continued to use both residences, you can nominate jointly which is to be the main residence". Obviously it's just an example and they don't clarify anywhere whether it's the same for owning and renting, sometimes it's worded owned and sometimes residence.

As I said it's just to do with working out how much rather than if she has to pay. When she married in 2013 she didn't change how many properties she owned, she just lived somewhere else. There's also the 3 years living away from your main residence that you're allowed as well.

There's also the 3 years living away from your main residence that you're allowed as well.

Yuo normally need to move back into the house to claim this relief.

She did yes, there was a short period after she got married and before renting out where she moved back.

Bookworm105

rjspaul87 said:

sheramber said:

rjspaul87 said:

Thanks for the response and yes we've seen that calculator thanks. We were thinking the same way but considering she has to work out herself how much to pay we need to be sure. The only thing that confused me and the reason why I'm asking is to do with what I perceive to be different between ownership and residency.

It says that when you marry you should nominate which house will be the main residence but you don't have to live at said main residence but because she didn't nominate hmrc will decide themselves which was the main residence and they will decide that based on where she actually spent her time I'm sure.

Also the wording on the gov website made me doubt what it meant:
"If, when you married or registered as civil partners, you each OWNED a residence and you’ve continued to use both residences, you can nominate jointly which is to be the main residence". Obviously it's just an example and they don't clarify anywhere whether it's the same for owning and renting, sometimes it's worded owned and sometimes residence.

As I said it's just to do with working out how much rather than if she has to pay. When she married in 2013 she didn't change how many properties she owned, she just lived somewhere else. There's also the 3 years living away from your main residence that you're allowed as well.

There's also the 3 years living away from your main residence that you're allowed as well.

Yuo normally need to move back into the house to claim this relief.

She did yes, there was a short period after she got married and before renting out where she moved back.

to claim the absence rule it must be reoccupied as the main residence
however, as already established in this thread, she was married at that point and therefore the marital main residence remained the rented property because she did not nominate it to be otherwise
she cannot claim the absence rule in her (solo) instance.

PRR applies from date of purchase to date of marriage given she then moved into husband's rental
CGT liability is for the rest of the ownership