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TonyTax
TonyTax, Tax Consultant
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We are a married couple with a second home purchased 11 years

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We are a married couple with a second home purchased 11 years ago. Our main home was purchased 14 years ago.
If we sell the second home (which is in my wife's name) will we pay full capital gains on this. Can we reduce this by living in the second home for a period or 'nominating it'
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

You are too late to nominate as you have to do that within two years of the second or subsequent acquisition. In any event, at present you have no ownership of the second property (its in your wife's name), a married couple can only have one main residence between them and such an election would not be backdated 11 years. The government plans to scrap the ability to make a main residence election due from April 2015 due to abuses of the rules.

How existing main residence elections will fit in with any scrapping of the election if that happens remains to be seen. As we approach a general election and the budget only takes place a couple of months beforehand, some government fiscal plans may be dropped in the "wash up" before the election which is where the political parties agree to allow some things through by consent and others to be dropped by consent.

If you moved into the property and made that your main home, you could not simply sell it a few months later to capture the last 18 months of ownership as a tax free period as such action will probably be attacked by HMRC as a pure tax avoidance ploy. You would need to be looking at living in that property for at least year and in any event, if the main residence lelection is scrapped, the CGT postion would be based on the facts of the case, ie where you lived and for how long.

In order for your CGT position to mirror your wife's so that you get any main residence relief and letting relief if approproate based on her occupation of the property she owns, you would need to be living in it as your main home before it is put into joint names. Take a look here for more information on that. This probably doesn't apply to you as the property appears not to be one your wife owned before you maried.

There is more on the main residence and CGT here.

I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.

So. We joint own our main home. The second home was purchased for £300000. An estate agent has now estimated its value at £800000. So at present my wife would pay tax on £500000 CGT. Could she reduce this by living in the house for a year or is there another way to reduce CGT. Is it better to have it in both our names?

Expert:  TonyTax replied 2 years ago.
As I said in my previous post, a married couple can only have one main home between them. You cannot each have a main home for CGT purposes.

The gain will be divided over the entire period of ownership, using complete months for accuracy. The period covered by your occupation of a property is tax free and you are given the last 18 months of ownership as a tax free period even if you were not living there in that period. If the property is let as well as it having been your main home, letting relief of up to £40,000 per part owner is available. See page 6 and example 9 on page 7 of HS283.

Whether you should put the property into joint names requires some number crunching, though the potential gain is so big, a large proportion will be charged to CGT at 28% whatever you do. The lower rate of 18% only applies to individuals whose income and gains in any tax year do not exceed the start of the 40% threshold. Even if the gain was divided between the two of you, a large amount would still be taxed at 28%.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15850
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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