Reducing Capital Gains Tax on Selling a Rental Property

WendyTony

My understanding is that we will both own it from a CGT point of view from when he bought it as I am a spouse.  
We will need to go into the 24% CGT, but if we are both paying at least we will make use of my 18% allowance and two lots of £3k allowance, but I doubt that will be around for long! 
I'm waiting to see how much it will cost for a solicitor to do the work for us, as they can do the request to the Land Registry electronically, which is cheaper than us doing a manual form by post, so it may not cost much more than doing it ourselves and we would know it was done correctly.  It sounds like we can forget about having the deeds changed if we do go down the route of doing it ourselves, just want to make sure we don't cause extra work when we get to selling it by not doing it correctly now. 

Bookworm105

WendyTony said:

My understanding is that we will both own it from a CGT point of view from when he bought it as I am a spouse.  
We will need to go into the 24% CGT, but if we are both paying at least we will make use of my 18% allowance and two lots of £3k allowance, but I doubt that will be around for long! 

correct. Each of you will have a gain based on selling price less original purchase price when he bought it in the first place (assuming that purchase was after 31 March 1982) 

• that gain will then be split into your ownership shares and you each get to deduct the £3k CGT allowance from your respective gain
• the remaining amounts is then your individual taxable gain 
• to determine how much of that taxable gain will be exposed to the 24% rate you then add it to your gross income subject to income tax and deduct £50,270 from that total (ie the threshold above which higher rate income tax applies)  Anything left is taxed at 24%

If there is a significant difference between what each of you earn as income subject to income tax you may want to consider splitting the property unequally. That way the person with the lower income gets less of the gain taxed at 24% - I note you imply the gain is big enough to push it into the 24% band anyway.
If you do an unequal split you'll need to own as Tenants in Common, not Joint Tenants, and have a very simple Declaration of Trust documented which states the respective shares (template DoT can be found online for free)

WendyTony

We haven't lived there ourselves, so it only a BTL.
We both have some 18% allowance to use before the 24%, so would gain by sharing the CGT, which as a spouse I understand would be from when my husband bought it.
It looks like registering with the Land Registry would mean we don't need to do anything with the deeds.  Just wanted to ensure we get it right so that there aren't any problems when we sell.  I'm waiting to get a quote from a solicitor for the work, as they send the info to the Land Registry electronically, that is cheaper than the cost of using the postal form, so it may not be too different in cost and we would know it was done correctly.

user1977

WendyTony said:

It looks like registering with the Land Registry would mean we don't need to do anything with the deeds.

What do you mean by "the deeds"? The ownership of the property is registered at the Land Registry, the only "deed" is the thing you send to the Land Registry to change the ownership.

saajan_12

Olinda99 said:

why do you think this will reduce cgt ?

Because two people have two lots of 3k allowance? 

Olinda99 said:

you can't retrospectively do it ie say oh all.these years past it was really both of us on the deeds. You can do it going forward of course. You don't need a solicitor.

Did you miss the part that said "my husband"? From a CGT perspective, its effectively the same as if it was both on the deeds all those years. 

Are you just quizzing the OP for fun? As none of your points actually raise any valid considerations that would lead to the correct answer. 

Bookworm105

WendyTony said:

We haven't lived there ourselves, so it only a BTL.
We both have some 18% allowance to use before the 24%, so would gain by sharing the CGT, which as a spouse I understand would be from when my husband bought it.

correct.
Given your response I will assume you don't have a big enough difference in income between you to make much difference to the overall tax payable and therefore justify going the unequal ownership option.

WendyTony said:

It looks like registering with the Land Registry would mean we don't need to do anything with the deeds.  Just wanted to ensure we get it right so that there aren't any problems when we sell.  I'm waiting to get a quote from a solicitor for the work, as they send the info to the Land Registry electronically, that is cheaper than the cost of using the postal form, so it may not be too different in cost and we would know it was done correctly.

the Land Registry records show who is the legal owner of the property. The legal owners are those entitled to sell it. 
As others already mentioned, the LR records supplant the physical deeds for that purpose. 

But, for CGT purposes, it is not who is legal owner, but who is entitled to receive the money from any sale, ie its "beneficial owner" that matters.

LR records assume that where there is more than one owner, then the default is (beneficial) "Joint Tenants" ie 50/50 and that is all that needs to be done.

leaving it to your solicitor may not be totally MSE, but in your case sounds by far the simplest and most practical option.

WendyTony

Thanks for all comments, you have been very helpful and raised some points I hadn't considered, as well as clearing up the confusion.

GDB2222

All this talk about deeds … can I check that the property has been registered at the Land Registry?