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bigduckontax, Accountant
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I owned a home with my at the time partner. This property was

Customer Question

I owned a home with my at the time partner. This property was bought in 1989.
In 2006 we separated and she remained in the property
I needed to get a mortgage for myself and my new partner and our mortgage broker suggested changing the Soham property to a buy-to-let which would mean I could then apply for a new main residence property mortgage.
We did this and I purchased another house.
Unfortunately after 18 months the relationship broke down and I moved out and the house was sold, meaning I had no main residence or main residence mortgage which is still true to this day.
No rent was ever paid/recieved from the buy-to-let house, myself and my ex partner just carried on paying the mortgage and still are.
We have now decided to sell the Soham house. Will we have to pay CGT?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.
You always are liable to CGT on the gain on sale of a property, not many people realise this. Most, of course, are entitled to Private Residence Relief (PRR) which is allowed at 100% reducing CGT to zero.
PRR would be allowed for any period of occupation as your sole or main domestic residence. Work this out in months. Now work out the total ownership period ditto. Let us suppose you occupied for 2 years and owned for 8. Your CHT would be based on 6/8 of the gain at 18% or 28% depending on your income including the gain in the year of sale. But soft, the last 18 months are deemed to be in residence even if you are not so to the 24 months [for the 2 years] is added 18 = 42. PRR thus applies to 42 months of the total 96 of ownership so 54/96 of the gain is exposed to CGT. Now divide this gain by two and you have a figure for taxable gain. You have an Annual Exempt Allowance of GBP K11 each to deduct from that gain also. As there was no rental income Lettings Relief does not apply, pity that, it's worth up to 40K! Simple, as the Mercat in the TV advert would say!
For CGT purposes the mortgage is an irrelevance, it doesn't come unto the computation at all.
I do hope I have shed some light on your conundrum.
Customer: replied 2 years ago.

Hi Keith,

Thanks for the reply but that sounds quite confusing to me.

My ex partner has been living in the property permanently, so does that mean she would not be liable for any CGT?

I lived there from 1989 until 2006 but not for the last 8 years – does that mean I would be liable for CGT?

When it comes to selling the property how is this all worked out and by who?

Expert:  bigduckontax replied 2 years ago.
Correct, her PRR covers the whole period of her ownership, just you gets clobbered on the half share of the gain. As I said you are always exposed to CGT on property gains, but PRR applies in most cases so, in the words of Michael Caine, 'Not many people know that!'
You CGT exposure would be, in round terms, of the order of 6.5/25 times the gain divided by 2 less the 11K Annual Exempt Allowance. The gain is calculated on the purchase price plus costs plus improvements, but not maintenance, less the net sale price. Tax is at 18% or 28% depending on your income including the gain in the year of sale.
The gain is worked out by you or your financial advisers and entered in your annual self assessment tax return covering the date of sale. Your ex partners PRR will kick in automatically, it is only you who will have to make an adjustment. Your solicitor might help, but many won't touch it with a barge pole.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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