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Answered in 31 minutes by:
5/23/2013
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 16,712
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
VerifiedHi.
Transactions between married couples who live together are tax neutral until the end of the tax year in which they permanently separate so you are clearly beyond that point.
If you sell the house you live in, your share of the gain will be exempt from Capital Gains Tax under the main residence rules. Of your wife's share of the gain, that part covered by her occupation of the property and the last three years of her ownership will be exempt from CGT so about two years of the gain as a proportion of her share would be taxable.
If you buy your wife's share of the flat from her, the proportion of the gain for the period that she lived in it as her main home will be exempt from CGT. Since the transaction will not be an arm's length one, it should be done at the open market value to avoid problems with the tax office.
Take a look at HS283 for more information on the mian home and CGT.
I hope this helps but let me know if you have any further questions.
Transactions between married couples who live together are tax neutral until the end of the tax year in which they permanently separate so you are clearly beyond that point.
If you sell the house you live in, your share of the gain will be exempt from Capital Gains Tax under the main residence rules. Of your wife's share of the gain, that part covered by her occupation of the property and the last three years of her ownership will be exempt from CGT so about two years of the gain as a proportion of her share would be taxable.
If you buy your wife's share of the flat from her, the proportion of the gain for the period that she lived in it as her main home will be exempt from CGT. Since the transaction will not be an arm's length one, it should be done at the open market value to avoid problems with the tax office.
Take a look at HS283 for more information on the mian home and CGT.
I hope this helps but let me know if you have any further questions.
Hi again.
You can claim the cost of improvements but you may be asked by the tax office for proof of such expenditure.
For the purposes of my calculations, I've assumed a sale of the house happens in September 2013 and the sale of your wife's half share of the flat to you happens in September 2013.
HOUSE
As I said in my earlier answer, your share of the gain on the sale of the house (£60,000) will be exempt from CGT due to the main residence rules.
Of you wife's share of the gain (£60,000), that part for the period she lived there will be exempt from CGT as will the gain for the last 36 months of ownership. That accounts for the gain for 249 months of the total period of ownership of 278 months. In monetary terms, £53,741 of your wife's share of the gain will be exempt from CGT (£60,000 / 278 months x 249 months) and £6,259 will be taxable. However, this will be covered by the annual CGT exemption of £10,900 so no tax will be payable.
FLAT
Your wife's gain from selling her share of the flat to you will be exempt from CGT as she has lived there since you bought it.
You can claim the cost of improvements but you may be asked by the tax office for proof of such expenditure.
For the purposes of my calculations, I've assumed a sale of the house happens in September 2013 and the sale of your wife's half share of the flat to you happens in September 2013.
HOUSE
As I said in my earlier answer, your share of the gain on the sale of the house (£60,000) will be exempt from CGT due to the main residence rules.
Of you wife's share of the gain (£60,000), that part for the period she lived there will be exempt from CGT as will the gain for the last 36 months of ownership. That accounts for the gain for 249 months of the total period of ownership of 278 months. In monetary terms, £53,741 of your wife's share of the gain will be exempt from CGT (£60,000 / 278 months x 249 months) and £6,259 will be taxable. However, this will be covered by the annual CGT exemption of £10,900 so no tax will be payable.
FLAT
Your wife's gain from selling her share of the flat to you will be exempt from CGT as she has lived there since you bought it.
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 16,712
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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