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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4191
Experience:  FCCA FCMA CGMA ACIS
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Hi, my wife and I have owned a house since 1983, but we separated

Customer Question

Hi, my wife and I have owned a house since 1983, but we separated in 2004 and I moved into rented property whilst my wife continued to live in the family house, which is still registered in both our names at LR.

My wife moved to Holland in September 2012 to live permanently, and rented the family house out.

My wife and I divorced in 2013, and it was agreed (Verbally between us, no Court Orders were made) that I would assist in buying her a property in Holland and assume sole ownership of the family property in at the end of the tenancy. The tenancy ended in March 2014.

I now wish to sell the family home and purchase property for myself to live.

What are my tax liabilities?
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

There is a liability to Capital Gains Tax (CGT) in this matter due to your renting out the property when neither you nor your wife were in occupation. The proportion of time of residence is usually calculated monthly basis, in this case total ownership time was say 372 months. Rented out for 18 months only 18/372, if any gain, about 5%, would be subject to CGT. If you also take into account your Annual Exempt Allowance (AEA) for CGT of 11.1K plus possible Lettings Relief of up to 40K, I would suggest that exposure to CGT would me minimal, if not nil.

Of course without figures I cannot be exact, but I am sure that you will see that the possibility of CGT is very low. I assume in my answer that the rental has been declared to HMRC as income on your annual self assessment returns.

What you agreed verbally is an irrelevance. If the house is still in joint ownership then liabilities would be half each, but both would have the AEA, even better.
Customer: replied 3 years ago.

Hi, thank you for a speedy reply.


 


The property was purchased in 1983 for £23.5K, it has a current market value of approx. £150K.


 


Yes, all rental income has been declared to HMRC.

Expert:  bigduckontax replied 3 years ago.
That is a capital gain of 126.5K, but as only 5% is chargeable, the gain comes out to 6.235K, well below the AEA so you do not have to concern yourself with the horrors of Lettings Relief. As I anticipated there will be no CGT to pay.

I do hope I have helped. Please be so kind as to rate me before you leave the site.
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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.