TAX QUERY FROM SALE OF HOUSE

NOT_THE_TAXMAN

My wife and I each have our own properties, but we both live in my house with hers rented out.

My wife is considering selling her house and using the income to help her income until she reaches pension age (7 years away).

If she sells what is her primary residence, but does not buy another house, does she have to pay tax on proceeds from the house sale ?

Thank you.

sheramber

your wife’s primary residence is where she lives.
A married couple can only have one primary residence, regardless of who owns it.

If she sells the house she rents out then she is liable for Calital Gains Tax.

eskbanker

https://forums.moneysavingexpert.com/discussion/6662793/tax-query-from-sale-of-house

As above, she clearly wouldn't be selling her primary residence if it's a property she's letting out, but any time she had lived there would be factored into the CGT calculation.

Isthisforreal99

She can only claim private residence relief for the period she actually lived there - presumably before she moved in with you?

NOT_THE_TAXMAN

https://forums.moneysavingexpert.com/discussion/comment/81950797#Comment_81950797

And what if she was to move back in to the property ? Thanks.

NOT_THE_TAXMAN

UPDATE: she isn't actually "letting out" the property, its being used by her daughter who makes a contribution towards the monthly mortgage payments. All the bills and services are still in my wife's name.

Does that make a difference ?

Thanks

BikingBud

Should ask Angela!

sheramber

https://forums.moneysavingexpert.com/discussion/comment/81950877#Comment_81950877

No. It is a property that is not her primary residence.

A married couple can only have one primary residence so her moving in wouldn’t help.

Capital Gains Tax is calculated based on the length of time she has owned it less any amount of time that she lived in it as her primary residence.

While she is married to you she can only claim the property you both live in as her primary residence.

Keep_pedalling

https://forums.moneysavingexpert.com/discussion/comment/81950877#Comment_81950877

No, and whatever the informal arrangement is your wife is a landlord and your daughter a tenant. Moving back in won’t help as you can still only have one main residence between you.

CGT might not be that high and it could be zero, depending on how long she owned it, how long she owned it and the gain in value since the original purchase price. There is a calculator in this link that you can use to estimate the amount due.

https://www.tax.service.gov.uk/calculate-your-capital-gains/resident/properties/disposal-date

uknick

The CGT principal private residence allowance is calculated on the months she owned the property, how many of those months she lived in the property and the final 9 months of ownership.

Therefore, moving back in just before she sells it is probably pointless as she gets the final 9 months anyway.

Who pays the bills for the property is irrelevant.

In addition, strictly speaking she is letting it out as she receives some form of rental income, albeit only a contribution to the mortgage payments. I assume she hasn't told HMRC this. She should have done if the income met any of the following criteria;

£1,000 or more in annual property income (before expenses).
£2,500 or more in annual income (after deducting allowable expenses).
Any amount if you live abroad.

BikingBud

Because I was asked by DM:

https://www.bbc.co.uk/news/uk-politics-68885428

Questions about Ms Rayner's living arrangements were sparked by claims in an unauthorised biography of her, written by Tory peer Lord Ashcroft, which was published in March.

She bought her former council house in Vicarage Road, Stockport under the right-to-buy scheme in 2007, eight years before becoming MP for Ashton-under-Lyne, in Greater Manchester.

Following her marriage in 2010, she sold the property for £48,500 more than she paid for it.

She initially said she didn't pay Capital Gains Tax (CGT) on the profit, because, like the "majority of ordinary people who sell their own homes," it was "my home and the only one I owned".

Those selling their "main residence" typically don't have to pay the tax. 

But married couples and civil couples can normally only count one property as their main home for CGT purposes, prompting questions over whether she should have paid some tax.