Have Tax Questions? Ask a Tax Expert for Answers ASAP
Hi Question in two parts really. Myself and a partner (not married) decided to buy a house together so put both of ours on the market, mine sold quickly. We bought a house (joint mortgage) with my capital (about £65k total - deposit plus building fund). We rented hers out. When we split she moved back into hers and and I am still in the joint owned, which is for sale. We are still pretty civil and I have no reason to believe she will try and take half my capital but I have to plan for the worst scenario. So the question is: 1. Since this was essentially her second house, would she be liable to gains tax on any profit, and if so how much (she is a 40% bracket earner)? 2. I am only paying interest on the place since we split. She has not paid the mortgage on this at all for a year now. Does that fact put me in any better position? Thanks Paul
Hi Keith, nice me "meet" you
You are right,, she would not have informed HMRC of PRR
One thing concerns me. I had £62k-ish from the sale of mine. £37.5k was the deposit, the rest went into doing the place up (no new kitchens etc but things like underfloor heating, tiling, etc etc), all difficult to pin down to actuals
Could you just clarify this sentence for me please:
"This gain is taxed at 18% or 28% or a combination of the two rates depending on the income level plus the gain in the year of sale"
Okay got that bit!
One last thing, we bought the house for £177k, £37k of which was the deposit that I paid, and spent around £33k of my money doing it up, £210k total.
If we sold for £250k then would, in the eyes of the taxman, the gain be £40k, or £73k (diff between 177 and 250). I'm trying to work out whether, if she were a b******* and try to take half my capital, she would be taxed on ALL her gain, house profit plus my half of the capital?
I'll put it this way, and maybe given your expertise is tax, I'm asking the wrong person:
Current mortgage is £140k, giving £110k clear if we sold for £250k
By rights, as in if all was fair, £70k of that £110k is mine (deposit and spend on renovation), and we split the remaining £40k
Seems that if she did try to take half of the £110k, she would only be subject to CGT on £20k?
This house was held as a joint tenancy and therefore is deemed to be a 50/50 ownership unless the deeds say to the contrary. Thus the gain which we know to be 40K will be split half each as I explained before for CGT purposes. How you divide the sale proceeds is a matter upon which you must mutually agree. Taking the whole sum the receipt is 250K. From that deduct the deposit and the renovation cost. The balance should the be divided 50/50 and each will receive their appropriate proportion of the sale price, she will get 90K and you 90K + 70K = 160K, total distribution 160K + 90K = 250K. That, in my opinion, is the logical and equitable solution. However, without full data as to who paid what so I can build up a joint venture account I cannot give a definite opinion.