I bought a house for 70k in september 2008. If i have to sign it over to my ex how much capital gains tax will be due if the court values it at 100k?
System of Law: England-and-Wales
Thanks for your question
When did you separate from your ex, and are you divorced, if so please advsie the dates for both.
Was this ever your main residence- if so please advise the dates, and if it had been your main residence at any time, did you then let the property out and declare rents to HMRC - if so please advise dates the property was let out.
And is this property in your joint names ?
Then I can advsie whether a capital gain arises.
Only in my. name, never the main residence not declared to taxman, , separated Nov2009 divorced may 2011
Thanks for your response
Then there will be a capital gain position, as this transfer is not taking place in the year of separation, and this is determined as the market value price (which you advise is £100K) less the purchase price of £70,000 so a capital gain of £30,000
(if there was rental income then this should be declared to HMRC)
From this you can deduct the legal costs to buy and transfer, and also the cost of any major work (such as new bathroom, new kitchen, new roof etc)
With the amount left over the first £10,600 will be tax free, as this is your annual exemption allowance, with any remaining amount liable to capital gains tax.
Then the rate of tax is dependent on how much unused basic rate band you have.
So, for example, if you are a higher rate taxpayer (annual income in excess of £42,475)
then the gain will be liable to 28% capital gains tax.
If, you are a basic rate taxpayer, so annual income less than £42475, then some or all of the gain will be liable to 18%.
For example, annual income of £32,475, this leaves £10,000 of the basic rate band free - so the first 310,000 of any gain would be liable to 18% and any gain in excess of this amount at 28%.
You should alert HMRC as soon as the transfer is made, so they can arrange to get a self assessment tax return from you for the year, on which you declare ALL income for the year as well as this capital gain position.
26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
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For example, annual income of £32,475, this leaves £10,000 of the basic rate band free - so the first £10,000 of any gain would be liable to 18% and any gain in excess of this amount at 28%.