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8/22/2010
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 16,712
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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Under normal circumstances, when you move from a property that was your main home to another one, you have three years from the date you move to sell the first without there being the possibility of a Capital Gains Tax liability.
A married couple who are living together can only have one main residence between them. However, if the couple have separated under a court order, by deed of separation or in circumstances such that the separation is likely to be permanent then each party to the marriage can have a different main residence. Unless you made an election for the first property to be treated as your main home within two years of buying the second, any dispute with the tax office over which is your main residence will be based on the facts of the case. ie where you are living. Only if the marriage hasn't broken down can you still claim the first house as your main home despite the fact that you aren't living there.
Depending on when you moved from the marital home in 2007, the three year window mentioned in the first paragraph may or may not be over yet. If it is over, then only that part of your share of any gain arising on the sale of the property for the period after the three year window as a proportion of the whole of your share of the gain will be taxable. So, if you sold it after ten years of ownership, 1/10th of your share of the gain would be subject to CGT with the first £10,100 being exempt.
You may find HS281 useful. Let me know if you need further expolantion or clarification.
Edited by Tony on 8/22/2010 at 7:35 AM EST
Under normal circumstances, when you move from a property that was your main home to another one, you have three years from the date you move to sell the first without there being the possibility of a Capital Gains Tax liability.
A married couple who are living together can only have one main residence between them. However, if the couple have separated under a court order, by deed of separation or in circumstances such that the separation is likely to be permanent then each party to the marriage can have a different main residence. Unless you made an election for the first property to be treated as your main home within two years of buying the second, any dispute with the tax office over which is your main residence will be based on the facts of the case. ie where you are living. Only if the marriage hasn't broken down can you still claim the first house as your main home despite the fact that you aren't living there.
Depending on when you moved from the marital home in 2007, the three year window mentioned in the first paragraph may or may not be over yet. If it is over, then only that part of your share of any gain arising on the sale of the property for the period after the three year window as a proportion of the whole of your share of the gain will be taxable. So, if you sold it after ten years of ownership, 1/10th of your share of the gain would be subject to CGT with the first £10,100 being exempt.
You may find HS281 useful. Let me know if you need further expolantion or clarification.
Edited by Tony on 8/22/2010 at 7:35 AM EST
As the second property is your main home, any loss you make on that for the period it was your main home as a proportion of the whole period of ownership will not be deductible from your share of any gain on a disposal of the first property in the same way that your share of any profit from the disposal of the second home would be tax free.
If you sell the first property after, say, 10 years of ownership for £475,000 your share of the gain will be £47,500 (£475,000 - £320,000 - £60,000 / 2). The gain for the period you lived there plus the gain for the last three years of ownership will be exempt. This accounts for £42,750 (£47,500 / 10 x 9). So, the taxable part of your share of the gain will be £4,750 (£47,500 - £42,750). This is less than the annual CGT exemption of £10,100 so you would have no CGT to pay.
The calculations would be more accurate if you divided the gain on the sale of the first property into months of ownership as opposed to years.
If you move back to the first property, unless you live there for in excess of another three years, you won't gain much as the last three years of ownership of what was a main residence are always exempt whether you are living there or not.
If you sell the first property after, say, 10 years of ownership for £475,000 your share of the gain will be £47,500 (£475,000 - £320,000 - £60,000 / 2). The gain for the period you lived there plus the gain for the last three years of ownership will be exempt. This accounts for £42,750 (£47,500 / 10 x 9). So, the taxable part of your share of the gain will be £4,750 (£47,500 - £42,750). This is less than the annual CGT exemption of £10,100 so you would have no CGT to pay.
The calculations would be more accurate if you divided the gain on the sale of the first property into months of ownership as opposed to years.
If you move back to the first property, unless you live there for in excess of another three years, you won't gain much as the last three years of ownership of what was a main residence are always exempt whether you are living there or not.
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 16,712
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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