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TaxVince
TaxVince, Accountant
Category: UK Tax
Satisfied Customers: 961
Experience:  Chartered Accountant >20 years + Qualified IFA
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I married 5 years ago, my wife and I owned our own properties,

Resolved Question:

I married 5 years ago, my wife and I owned our own properties, we continued to live separately, we are both in our 60s. We are now looking to buy a house to live in together, my house will be sold first approx £480K I bought 17 years ago for £120K, my wife's property has been valued as £550K she bought at a similar time for slightly more.
I am a 40% tax payer, my wife is retired. We have not nominated a principal residence. I undestand that I could be exposed to 28% CGT and that our joint allowance is £20,000. As we have never lived together at either address is there any way to reduce the amount of CGT due?
Submitted: 1 year ago.
Category: UK Tax
Expert:  TaxVince replied 1 year ago.

MamaTax :

Hi Its MamaTax Here!

MamaTax :

Thanks for the question.

MamaTax :

Are the properties jointly owned?

Customer:

no separately

MamaTax :

As you may be aware married couples and civil partners are required to must choose one property as main residence. Unmarried partners can each nominate a different home as their main home to get tax relief on both. If you dont then HMRC will decide this for you taking into account factors as were you normally stay , postal address etc

MamaTax :

Thanks for the reply.

MamaTax :

For tax purposes the definition of living together for main residence relief is as shown below:

MamaTax :

"You and your spouse or civil partner are treated as living together for tax purposes unless:
• you are separated under a court order, or
• you are separated by a formal Deed of Separation executed under seal
(in Scotland a deed should be witnessed), or
• you are separated in such circumstances that the separation is likely to
be permanent.

If the marriage or civil partnership has not broken down but the two of you do not live in the same house, you are still treated as living together for Capital Gains Tax purposes.

MamaTax :

Hence whichever property you nominate you will get full main residence if one of you has been living there.

MamaTax :

However you might want to take advantage of capital gains allowance on the properties that you each separately own in the case of future sale by transferring ownership to the spouse - there is no cgt on such transfers between married people.

MamaTax :

Husbands and wives or civil partners each have their own CGT allowance (£10,600 in 2012-13, £10,900 in 2013-14). By transferring an asset into your joint names, you can both make use of your tax-free allowance so that up to £21,200 of any gain can be tax-free in 2012-13, £21,800 in 2013-14. But the transfer to your spouse or partner must be a genuine outright gift.

MamaTax :

Therefore to sum up, if i were you, i would:
- transfer owership on all properties so that both of you own the properties jointly. No legal documents need changing but a simple Declaration of Trust/Document to say you both jointly own the property.
-Nominate a property as main residence. There is a 2 year limit but there is no harm in doing that before you decide to sell the property and get HMRC approval. If this is the case then there is no cgt on this property if either of you have been living in this property
-Once you buy the new property nominate the new property as new main residence or whichever property that you will be living in.

MamaTax :

The key point is that both of you can only have one main residence at any point in time.

MamaTax :

Let me know if you are answered. If you have more questions please let me know.

MamaTax :

I guess you are offline. I will wait to hear from you. if you are satisfied you can go ahead and rate the question. If you are still not answered please let me know.

Customer:

Thanks, XXXXX XXXXX my question.

TaxVince, Accountant
Category: UK Tax
Satisfied Customers: 961
Experience: Chartered Accountant >20 years + Qualified IFA
TaxVince and 4 other UK Tax Specialists are ready to help you

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