Capital Gains Tax confusion

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    Capital Gains Tax confusion

    Hi

    We are considering selling our second home and wonder if anyone can help.

    Background: My husband bought the home in 1988 for £44,000. Over the years it has been rented out for 1 year, empty for 2 years and rented out again for the last 3 years. Up until 3 years ago it was his main residence and he had lived there for 26 years.

    I moved in as my main residence in 1997 and moved out in 2017, being 20 years.

    It is currently valued at £170,000.

    My questions are:

    What is classed as main residence as we were not married and I was not on the house deeds for part of the time?
    Do you need to provide proof of main residency? (I do not have any utility bills etc going back that far)
    Is PRR calculated per person? (as we were living there for different amounts of time)
    I think there is a CGT allowance, is it per person and £12,300 each to deduct from April?
    What will be the CGT amount due?

    ​​​​​​Apologies if anything isn't clear. Thank you in advance

    #2
    Assuming there's no mortgage and you own the property jointly as joint tenants.

    There are two separate periods of ownership.
    Your husband alone and you both together and you work out the gain for each period separately.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Thanks for the reply. Can anyone help with my other questions please?

      Comment


        #4
        Originally posted by FluffyBunny View Post
        What is classed as main residence as we were not married and I was not on the house deeds for part of the time?
        Your main residence is the place that you live. If you live in more than one place, you need to tell HMRC which is your primary residence and update them if it changes.
        Most people only have one residence, so it's just a matter of fact.
        Based on what you posted, it was your main residence between 1997 and 2017 and his between 1988 and (assuming you both moved out) 2017.
        Do you need to provide proof of main residency? (I do not have any utility bills etc going back that far)
        If HMRC challenge your calculation, possibly.
        But there will be electoral records, tax returns, bank records if necessary.
        The chances of needing to prove anything a tiny.
        Is PRR calculated per person? (as we were living there for different amounts of time)
        Yes. You need to calculate the gain that happened during the different periods of ownership. While you were both owners, the gain is divided by whatever %ge you each owned. If it wasn't explicit it is assumed to be 50:50.
        I think there is a CGT allowance, is it per person and £12,300 each to deduct from April?
        Yes.
        What will be the CGT amount due?
        It's not possible to work it out without knowing when you became an owner, but I don't think there's going to be enough for it to be an issue.
        There's a maximum gain of £126000 (although you can deduct sales costs, fees, legal costs etc, which will reduce that figure).
        It's been 32 years, so the annual gain is just under £4k.
        It was only in the letting business for 6 years, so the maximum taxable gain looks like £24k.

        So, depending on when you acquired ownership, it's possible your husband's gain will be over his personal allowance, but the worst it could be is just under £12k, so about £2k or £3k in tax depending on his tax rate.
        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

        Comment


          #5
          Thank you jpkeates, very helpful

          Comment

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