CGT on Rental Property

tightasafish

Hi all.

When I met my now-wife four years ago her son, wife and their child had moved in with her in an attempt to cut their costs in order to help them to pay off debts that they had accrued.

In 2024 my wife moved in with me and charged her son rent - all of which has been declared to HMRC and tax paid accordingly.

In May this year her son moved out and the house was sold.

My question is this. Will she be liable to CGT? She and her now deceased husband bought the house from the local Council under the right to buy scheme c1998 for around £40000 and sold it this year for £220000. From 1998 to 2024 she lived in the property.

With thanks for any advice.

anselld

Dates would be needed for exact calculation but the portion of the gain circa 26 years (needs calculation in months) plus the final 9 months would be exempt as private residence. So the period liable would be a small portion of the gain.

More to the point there is some urgency because any gain needs to be reported within 60 days of the sale. So it may pay to get a tax accountant to do the sums rather than spend too much time researching yourself.

Woodstok2000

She will need to pay CGT, but likely not very much. You do not pay for the period it was the main residence, or the final 9 months. Per HMRC:

"If the dwelling house has not always been your only or main residence, you will need to split the gain. When calculating the proportion of the gain eligible for relief, you multiply the gain by a fraction equal to the periods of occupation (including the final 9 or 36 months where appropriate) divided by the period of ownership (both periods starting at 31 March 1982 if the house was owned before that date). You do not introduce valuations of the property at the dates of changes of use."

So assuming she bought it in Jan 98 and moved out in Jan 24, then sold it in May26. That would be about 341 months. She lived there for 312 months, and gets 9 months relief at the end making 321 months so her liability is (20/341)*180000, or about £10,000. She has a £3000 cgt allowance, so would need to pay cgt on about £7000.

TroubledTarts

Based on the calculation above I wonder if she would have helped out in this way again knowing she had already done a nice thing and then there was an end cost of circa £7000.

anselld

https://forums.moneysavingexpert.com/discussion/comment/82075933#Comment_82075933

It wouldn’t be a cost of £7000. It is tax on £7000 gain which would be a maximum of £1680. Or less for a standard rate tax payer.

mta999

can buying and selling costs be deducted from the gain or just a proportion ?

TroubledTarts

https://forums.moneysavingexpert.com/discussion/comment/82075945#Comment_82075945

Cheers for correcting that

anselld

https://forums.moneysavingexpert.com/discussion/comment/82075956#Comment_82075956

Yes buying and selling costs and any capital improvement costs are deducted before apportionment.