My husband and I separated in 2006 and later that year we put…

Hi

Thanks for your question

I am afraid that spousal transfers are only exempt when the couple are still married - as in living together - and as you separated in 2006 any transfers made after this tax year will be liable to capital gains tax. But transfers made in the year of separation are exempt, as you are considered to be married for that tax year.

So lets look at the two properties in question -

Regarding the rental flat in your sole name, there will be a capital gain consideration.
If he buys this from you at market value - (or its gifted, swapped or sold at less than market value to him) you will still have a capital gain consideration as this is a property that was never your main residence.

The gain will be calculated on the sale price (or market value price) less the purchase price, which forms the initial gain.
From this initial gain can be deducted the incidental costs to sell and buy (such as legal costs, estate agent fees etc) and the cost of any major repairs/renovations.

What is left over is the chargeable gain, with the first £10,100 capital gain free (as this is your annual exemption allowance) with the rest liable at the appropriate rate of capital gain tax.

Capital gain tax will either be paid at 18% or 28% or a combination of the two - this is dependent on whether your other income is less than the basic rate threshold of £43875 - if its above, all the gain will be liable at 28% - if its below, then any used basic rate band can be used to allow that part of any gain to be liable at 18% tax.

Taper relief and indexation were abolished from 05/04/2008 so I am afraid there is no further reduction to be had.

Regarding the flat that your husband currently resides in - you advise that the first 15 months were joint ownership and it was a rental property. Then it became his main residence and was in his sole name.

He will have an exemption for the time he lived there - and also may qualify for private lettings relief, if the property was let out to tenants (and rental income declared to HMRC) - this will allow a up to further £40,000 worth of exemption.
So husband may only have a small gain here to consider.

So whilst it would be less costly for the flat resided in by your husband to sell as far as capital gains is concerned, the sale of your rental flat would give rise to an high capital gain.
Plus your husband would then have a further capital gain consideration on disposal as this would not be his main residence.

If you would like some figures to consider please advise
Flat you own and rent out
1) Purchase price and month and year of purchase
2) Incidental costs to buy - legal etc etc
3) Value at todays date
4) Approx incidental costs to sell (legal fees and estate agents etc)

Flat husband resides in
1) Purchase cost and month and year of purchase
2) Incidental costs to buy (legal fees etc)
3) Confirm this has been rented out for the first 15 months and that rental income was declared to HMRC
4) The month and year husband moved in
5) Value at todays date
6) Approx incidental costs to sell (legal fees, estate agent etc)

Then you can review the figures are see what costs are involved and help you reach an informed decision

Thanks

Sam