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Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 14102
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hi, My clients husband asked me; I have a house on a mortgage

Resolved Question:

Hi,
My clients husband asked me;
I have a house on a mortgage purchased in 1987 at a cost of £30k.
The value now is approx. £170k.
The house was purchased when he was single and he lived in it till 1996.
His future wife moved in with him in 1996 for 6/7 years.
They then moved out and lived in the flat above the hairdressing shop his now wife owned.
The house was rented out to a friend who paid the mortgage and bills, recently the council have put the friends name on the council tax bill.
The husband is now looking to sell the house and is considering the position of the Inland Revenue as to what tax if any would be payable on the sale.

I look forward to your reply in due course.

Best regards,

Les.

Best
Submitted: 1 year ago.
Category: UK Tax
Expert:  Tony Tax replied 1 year ago.

Hi.

If you let me have the following information, I'll do some calculations:

1 The month in 1987 the house was bought.

2 The month and year the husband and his wife moved out of the house.

3 The month and year the house was first let? Has it been let continuously since? Is it still let? If not when exactly did the letting cease?

4 Is the house in the name of the husband alone? If not, when exactly was it put into joint names?

Customer: replied 1 year ago.

Hi,


 


The couple did not marry until 30.9.2005


 


1. the house was purchased in July 1987.


2. the couple moved out in March 2004 (not married till 30.9.2005)


3. the house was let in April 2004 till May 2008 to a friend and then re-let in June 2008 to current date.


4. the house is in his name only.


All the bills for the property were in his name until June 2011 when the council told him the rates bill has to be in the name of the tenant.


 


Regards,


 


Les.

Expert:  Tony Tax replied 1 year ago.
Thanks.

Leave this with me while I do some calculations.
Customer: replied 1 year ago.

O.K. thank you.


 


Les

Expert:  Tony Tax replied 1 year ago.
I'm back.

If your client's husband sells the property in September 2013 for £170,000 he will make a gain of £140,000, having paid £30,000 for it in April 1987. By that time he will have owned it for 315 months of which he will have lived it for 201 and let it for 114.

The gain for the period the property was his main home will be exempt from CGT as will the gain for the last 36 months of ownership. That accounts for £105,333 (£140,000 / 315 x 237). The remaining gain of £34,667 is that part of the letting period gain which is not covered by the last 36 months of ownership (£140,000 / 315 x 78).

As the property was both his main home and it was let he is entitled to letting relief which is the lesser of:

1 £40,000,

2 the sum of the main residence gain and the gain for the last 36 months of ownership of the property which is £105,333 and

3 the letting period gain of £34,667.

So, the remaining gain will be covered by letting relief of £34,667 and your client's husband should have no CGT to pay.

I hope this helps but let me know if you have any further questions.
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 14102
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
Tony Tax and other UK Tax Specialists are ready to help you

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