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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15758
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hello, I own a house with my sister which we both lived in.

Resolved Question:

Hello, I own a house with my sister which we both lived in. However I got married and my husband and I and have a house together and my sister now lives there on her own and pays all costs. Now we want to sell that house so she can get her own with her partner, will we have to pay capital gain tax? And we me and my husband have to pay when we come to sell our house?

kind regards,
Sus***** *****
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

If you can let me have the following information, I'll do some calculations:

1 The month and year that you and your sister bought the house and what it cost to buy. If you inherited it or it was gifted to you, what was it worth when you inherited it and when did that happen?

2 When did you each move in to the house? When did you move out? What is it worth now?

3 When did you and your husband buy your house?

Customer: replied 2 years ago.

Hello, thank you for your response. Both myself and sister had savings and bought the house together, being single at the time and trying to get on the property ladder. We moved in late October 2010, I then moved in with my partner at the time (before married) he paid deposit and we got a joint mortgage August 2012. My sister remained and agreed to take on all payments and she still lives there today. House was purchased for £215,000 and if sold today would be in the region of £265,000-£275,000

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Customer: replied 2 years ago.

Thank you

Expert:  TonyTax replied 2 years ago.
Hi again.

As your sister has lived in the property for the entire period of her part-ownership of it, her share of any gain you make will be tax free so long as the property is sold within 18 months of her moving out.

Assuming the property is sold in, say September 2014, by that time you will have had an interest in it for 47 months from late October 2010 of which you will have lived in it for 21. Your share of the gain for that period will be tax free as will your share of the gain for the last 18 months of ownership. That amounts to £24,894 (£30,000 / 47 x 39) assuming you sell it for £275,000. The remaining taxable gain of £5,106 will be covered by the annual CGT exemption of £11,000 and so you should have no CGT to pay.

As for the house you own with your husband, so long as you live in it for the entire period of ownership or sell it within 18 months or moving out, any gain you make will be tax free. This is on the basis that you did not elect for the property you own with your sister to be treated as your main home when you acquired a second one with your husband.

Take a look here for more information on the main home and CGT.

I hope this helps but let me know if you have any further questions.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15758
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
TonyTax and 2 other Tax Specialists are ready to help you
Customer: replied 2 years ago.

Thank you so much for your response, as me and my sister have been arguing over this and didn't know where we stood with it all. Your answer has been very helpful and I can now go and tell her the good news. Smile


Kind regards,


Susanna

Expert:  TonyTax replied 2 years ago.
Thanks and good luck.

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