CGT Question

[Openside]

With the Tax raid looming I have a Tax question

If my wife sells her London home will she pay CGT on the difference between selling price and purchase price or the difference in value 2 years after we married??

[Openside]

no one has any idea??

[SaintK]

no one has any idea??

......how about your Independent Financial Adviser rather than random blokes on a rugby forum?
Oh and I have absolutely no idea.

[Tommy Brown]

Can she not declare it her primary residence and then not have to pay any CGT?

[Saint]

If it used to be her primary residence, but stopped being that once you married, then she's entitled to Private Residence Relief for 2 different periods:

1 - the period of time it was her primary residence
2 - the final 18 month period she owned the home.

The gap in between is the gain that she has to pay CGT on. To work it out, you don;t need different valuations - you take the total Capital Gain and pr-rate it based on the amount of time that doesn't qualify for private Residence Relief

So if you she owned it for 100 months, lived in it for 60, then that leaves 22 months of Capital Gain (after you allow for the final 18 months) - so the actual chargeable gain that is eligible for CGT would be 22% of the total gain

CGT allowance on property is something like £12K, so as long as the chargeable gain is below that level then you're all good - nothing to pay

[Line6 HXFX]

Can you not just count your blessings and your over privileged position, gifted to you at birth and just pay the tax the UK desperately needs?

[Ymx]

If it used to be her primary residence, but stopped being that once you married, then she's entitled to Private Residence Relief for 2 different periods:

1 - the period of time it was her primary residence
2 - the final 18 month period she owned the home.

The gap in between is the gain that she has to pay CGT on. To work it out, you don;t need different valuations - you take the total Capital Gain and pr-rate it based on the amount of time that doesn't qualify for private Residence Relief

So if you she owned it for 100 months, lived in it for 60, then that leaves 22 months of Capital Gain (after you allow for the final 18 months) - so the actual chargeable gain that is eligible for CGT would be 22% of the total gain

CGT allowance on property is something like £12K, so as long as the chargeable gain is below that level then you're all good - nothing to pay

It would be in the above (sold price - buy price) x 28% x 22% - threshold

Where threshold is the £12k above (if that’s the number)

Not (sold - buy) x 22% - threshold

It’s not 22% of the total gain, it’s 22% of the cap gains tax amount, hence need to also multiply total gain by CGT @ 28%

However I thought the 18 months didn’t carry. Just if you sell within 18 months of it not being your primary residence, no tax to pay, but thereafter the full whack based on the percent of time it’s been the main residence. Could be wrong about that though.

If correct it would be
(Sold - purchase) x 40% * 28% - 12000

[Saint]

If it used to be her primary residence, but stopped being that once you married, then she's entitled to Private Residence Relief for 2 different periods:

1 - the period of time it was her primary residence
2 - the final 18 month period she owned the home.

The gap in between is the gain that she has to pay CGT on. To work it out, you don;t need different valuations - you take the total Capital Gain and pr-rate it based on the amount of time that doesn't qualify for private Residence Relief

So if you she owned it for 100 months, lived in it for 60, then that leaves 22 months of Capital Gain (after you allow for the final 18 months) - so the actual chargeable gain that is eligible for CGT would be 22% of the total gain

CGT allowance on property is something like £12K, so as long as the chargeable gain is below that level then you're all good - nothing to pay

It would be in the above (sold price - buy price) x 28% x 22% - threshold

Where threshold is the £12k above (if that’s the number)

Not (sold - buy) x 22% - threshold

It’s not 22% of the total gain, it’s 22% of the cap gains tax amount, hence need to also multiply total gain by CGT @ 28%

However I thought the 18 months didn’t carry. Just if you sell within 18 months of it not being your primary residence, no tax to pay, but thereafter the full whack based on the percent of time it’s been the main residence. Could be wrong about that though.

If correct it would be
(Sold - purchase) x 40% * 28% - 12000

I double checked and as far as I can see the 18 months counts regardless

[Uncle fester]

Which wife is this now?

[Ymx]

If it used to be her primary residence, but stopped being that once you married, then she's entitled to Private Residence Relief for 2 different periods:

1 - the period of time it was her primary residence
2 - the final 18 month period she owned the home.

The gap in between is the gain that she has to pay CGT on. To work it out, you don;t need different valuations - you take the total Capital Gain and pr-rate it based on the amount of time that doesn't qualify for private Residence Relief

So if you she owned it for 100 months, lived in it for 60, then that leaves 22 months of Capital Gain (after you allow for the final 18 months) - so the actual chargeable gain that is eligible for CGT would be 22% of the total gain

CGT allowance on property is something like £12K, so as long as the chargeable gain is below that level then you're all good - nothing to pay

It would be in the above (sold price - buy price) x 28% x 22% - threshold

Where threshold is the £12k above (if that’s the number)

Not (sold - buy) x 22% - threshold

It’s not 22% of the total gain, it’s 22% of the cap gains tax amount, hence need to also multiply total gain by CGT @ 28%

However I thought the 18 months didn’t carry. Just if you sell within 18 months of it not being your primary residence, no tax to pay, but thereafter the full whack based on the percent of time it’s been the main residence. Could be wrong about that though.

If correct it would be
(Sold - purchase) x 40% * 28% - 12000

I double checked and as far as I can see the 18 months counts regardless

Yeah I think you might be right on that part, reading it. However, it’s actually now been reduced to 9 months.

Though the % of residence incl extra 9 months is percentage of cap gains tax, it total gains as per above.


Good example on gov site


Work out how much tax you have to pay
You’ll pay tax on your ‘chargeable gain’. This is your gain minus any Private Residence Relief you’re eligible for.

You get full relief for:

the years you lived in the home
the last 9 months you owned the home - even if you were not living there at the time
If you sold the property between 6 April 2014 and 6 April 2020, you get relief for the last 18 months you owned it.

If you only own one home and you’re disabled, in long-term residential care or sold the property before 6 April 2014 you get full relief for the last 36 months you owned it.

Example
You make a gain of £120,000 when you sell your home, which you owned for 15 years. You lived in the whole property for 7.5 years, then you let it out for 7.5 years.

You get Private Residence Relief for the time you lived there (7.5 years). You also get relief for the last 9 months you owned the property, even though you were not living in it.

This means you get Private Residence Relief for 8.25 of the years (55% of the time) you owned the property.

You get Private Residence Relief on the same proportion (55%) of your gain. This means you will not pay tax on £66,000 of the gain.

The remaining 45% (£54,000) of the gain not covered by Private Residence Relief is your chargeable gain.

[Hal Jordan]

Which wife is this now?

Hello Dave!

[Uncle fester]

OS is my wife now.

[Sandstorm]

Can you not just count your blessings and your over privileged position, gifted to you at birth and just pay the tax the UK desperately needs?

REFRY gets one right this week.

[Openside]

Can you not just count your blessings and your over privileged position, gifted to you at birth and just pay the tax the UK desperately needs?

fuck off you total sponger!!

[Openside]

If it used to be her primary residence, but stopped being that once you married, then she's entitled to Private Residence Relief for 2 different periods:

1 - the period of time it was her primary residence
2 - the final 18 month period she owned the home.

The gap in between is the gain that she has to pay CGT on. To work it out, you don;t need different valuations - you take the total Capital Gain and pr-rate it based on the amount of time that doesn't qualify for private Residence Relief

So if you she owned it for 100 months, lived in it for 60, then that leaves 22 months of Capital Gain (after you allow for the final 18 months) - so the actual chargeable gain that is eligible for CGT would be 22% of the total gain

CGT allowance on property is something like £12K, so as long as the chargeable gain is below that level then you're all good - nothing to pay

It would be in the above (sold price - buy price) x 28% x 22% - threshold

Where threshold is the £12k above (if that’s the number)

Not (sold - buy) x 22% - threshold

It’s not 22% of the total gain, it’s 22% of the cap gains tax amount, hence need to also multiply total gain by CGT @ 28%

However I thought the 18 months didn’t carry. Just if you sell within 18 months of it not being your primary residence, no tax to pay, but thereafter the full whack based on the percent of time it’s been the main residence. Could be wrong about that though.

If correct it would be
(Sold - purchase) x 40% * 28% - 12000

thanks chaps

[Enzedder]

Come to NZ - decent rugby team, cold beer and no CGT.

[Glaston]

I think we now know for certain that Os is Scottish.


Free advice.

[Ymx]

Sorry, I’ve put you slightly wrong.

Work out your chargeable gain.

Chargeable gain =
(Sold - purchaser) x (months not resident - 9)/(total ownership months)

Can’t be less than zero, else use zero and no tax to pay ie only pay tax if you’ve not been primary for over 9 months

Then subtract the tax free limit on CGT which is £12.3k

And apply tax to the resulting number. Again, if negative, no tax to pay. ie if chargeable gain is less than £12.3k, no tax

CGT tax = (chargeable gain -12.3k) x 28%

[Muttonbird]

Wouldn't want you or your wife paying your way.

[charltom]

9 months is right. And it's not the purchase price you subtract, but (purchase price + purchase costs + cost of improvements).

[Ymx]

9 months is right. And it's not the purchase price you subtract, but (purchase price + purchase costs + cost of improvements).

So can you therefore include stamp duty, lawyers fees, mortgage arrangement in the costs?

[Openside]

Wouldn't want you or your wife paying your way.

why wouldn't we be ? If we wanted to avoid the tax completely we could just transfer into one of the kids names.

[Sandstorm]

Wouldn't want you or your wife paying your way.

why wouldn't we be ? If we wanted to avoid the tax completely we could just transfer into one of the kids names.

Nope, they pay CGT on transfer.

[Fangle]

Can you not just count your blessings and your over privileged position, gifted to you at birth and just pay the tax the UK desperately needs?

fuck off you total sponger!!

You miss-understand him. He means the attitude to get past your Scottish background, to work hard, to take chances and opportunities, to be positive about life and not blame everyone else for everything possible. And the abilities to fight beyond difficulties and achieve success.

[Openside]

Wouldn't want you or your wife paying your way.

why wouldn't we be ? If we wanted to avoid the tax completely we could just transfer into one of the kids names.

Nope, they pay CGT on transfer.

You can currently still gift houses No?

[Sandstorm]

You can currently still gift houses No?

No. Pay for some proper advice, you've been burned by stupid financial decisions in the past.

[Saint]

why wouldn't we be ? If we wanted to avoid the tax completely we could just transfer into one of the kids names.

Nope, they pay CGT on transfer.

You can currently still gift houses No?

You;re liable for the same CGT when you gift the property to a child as if you sell it. It's effectively treated as if you were to sell the property and then gift the cash sum to your child.

You then also need to make sure you stay alive for 7 years, or they then become liable for Inheritance Tax if it;s value exceeds the thershold

[Openside]

You can currently still gift houses No?

No. Pay for some proper advice, you've been burned by stupid financial decisions in the past.

Christ on a bike of course I would get proper advice before actioning, I am just trying to get a feel for our exposure.