CGT - Private Residence Relief when moving into care home

NedS

Hi,

Mum and Dad own their property outright as tenants in common (equal share).

Dad has moved into permanent/long-term residential care, mum continues to reside at the property.

I am interested to understand dad's capital gains position as the property is no longer his primary residence.

I understand from the tax manuals that dad will qualify for 36 months of private residence relief as he is a disabled person and a long-term resident of a care home.

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64986

Dad has now been in care for more than 12 months. What happens if dad exceeds the 36 month period of relief? Does dad then incur CGT for any gains on his 50% share of the property?

What happens if dad is still in the care home and mum is still living at the property after 36 months so the property is not able to be sold? How would we calculate any CGT liability?

At what point(s) would we require a valuation of the property?

poseidon1

Where it comes to your father's half share there is a fractional computation which when applied to his gross gain, arrives at the exempt portion on a time apportioned basis.

The fraction is Total qualifying period ÷ Total period of ownership.

Example, say property owned 20 years prior to sale and sold 48 months after father went into care and his gross gain was £100k -

The formulae for the exempt gain would be:

£100k x ( 20 years + 36 months ÷ 20 years + 48 months) = £95,833( exempt gain)

In this example your father's taxable gain therefore £100k - £95,883= £4,167 ( I kept things simple by working in whole years rather than months)

Obviously the sooner property sold after the 36 month extended qualifying period the greater the exempt gain and vice versa.

af1963

There won't be any CGT liability until it is sold.

If your father dies first, before it is sold there is no CGT payable on his share when it is passed to his inheritors.

If your mother should die first, before it is sold, then as tenants in common, her share can be left to others independently of your father's share. At that point your father's share would become available to be counted as part of his assets for care means testing. That wouldn't necessarily force a sale, but it might. And then the process that Poseidon1 describes would cover how the CGT is calculated.

If you sell it while both are still alive, your father will potentially pay partial CGT on his half as described above, and then the proceeds will be part of the means test. Your mother will have full private residence relief on her share if she is still living there.

There's little point in your mother leaving her share to him, as it just puts it in the pot for means testing, so hopefully she hasn't done that.

NedS

https://forums.moneysavingexpert.com/discussion/comment/81871718#Comment_81871718

Thank you, that's really clear from your example.

NedS

https://forums.moneysavingexpert.com/discussion/comment/81871746#Comment_81871746

Thank you.

If I understand correctly:

If dad dies before the house is sold, dad's estate has no CGT to pay even if he survives for more than 36 months? His share passes in trust to children (again without any CGT liability). CGT applies to the sale of an asset, IHT applies to passing that asset on after death.

If the property is sold before dad dies, then any CGT liability is calculated as set out by @poseidon1 above.

Mum has no issues with CGT liabilities atm as she is still living at the property and therefore has full private residence relief. When she eventually goes into care, she will be afforded the same 36 months of private residence relief should she require it.

af1963

No CGT immediately after a death (but the potential for IHT, depending on the size of the estate - that's a different calculation !)

It's possible for an estate to incur CGT if the price rises after the death and it ends up selling for a higher price. The gain is calculated based on changes since market price at date of death.

https://www.gov.uk/government/publications/death-personal-representatives-and-legatees-hs282-self-assessment-helpsheet/hs282-death-personal-representatives-and-legatees-2025

silvercar

https://forums.moneysavingexpert.com/discussion/comment/81871924#Comment_81871924

Yes, your Dad’s estate would have no CGT liability and nor would the children on inheriting it. At least at that point in time.

Mum, has no CGT liabilities while it is her home, plus the last 36 months of ownership. Presumably, with no one living in the property at that point, it would be sold before the 36 months are exhausted, unless she were intending to rent it out to cover the care home bills.