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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My wife and I each owned our own house outright prior to our

Resolved Question:

My wife and I each owned our own house outright prior to our marriage. We still own them and live in them and nobody other than us lives in them. Each house is still in just one of our names.
What are our CGT liabilities on selling one of them?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Do you still each own the properties solely? How long have you been married? Do you use both of them? If so, do you spend more time in one of the properties?
Customer: replied 2 years ago.

Each is solely owned.

Married about 10 years.

She spends most of her time in hers and me in mine,

Albeit I spend 2 or 3 days most weeks in hers, she much less frequently in mine.

Expert:  TonyTax replied 2 years ago.
.Thanks.

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

Thanks. Will stay on line.

Customer: replied 2 years ago.

I should have said that due to their locations mine is worth substantially more than hers (albeit hers is a lot nice).

Expert:  TonyTax replied 2 years ago.
Hi again.

A married couple who are living as such can only have one main residence between them. If you didn't make an election for one of those homes to be treated as your main home within two years of having two homes available to you, notwithstanding the fact that you don't own two, then when you sell one, the matter will be decided on the facts which may not necessarily result in your preference. Read the notes here and here.

As of now, if you sell one of the properties and it is decided on the facts that it wasn't the main home from the date of your marriage, then part of the gain will be tax free and part will be taxable. The tax free part will be that proportion of the gain covered by the owner's occupation of it and the last 18 months of ownership of it (36 months prior to 6 April 2014). The balance of the gain will be taxable, though if it is sold in the 2015/16 tax year, the first £11,100 will be exempt.

There are two rates of Capital Gains Tax, 18% and 28%. The rate or combination of rates that will be paid will be dependent on the level of the income of the individual who makes the gain. Take a look here for more information on determining the CGT rate, though these are for the 2013/14 tax year.

Give that the rate of CGT payable is determined by the level of the income of the seller, you might be able to reduce the CGT exposure if you put the house you want to be treated as your main home into joint names and your respective incomes aren't roughly the same. It has to be done when it is your main home, you are both living there and you are confident that you can argue that it is. If you can do that, then the individual who is added to the deeds will be taxed on half the taxable gain and will get the same amount of main residence relief as the original purchaser. That's one of the benefits of marriage. Read the notes here for the specific conditions.

Take a look at HS283 for more information on the main home and CGT.

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

many thanks.

it is clearly much more complicated than I had imagined and we should have thought of tax planning a while ago.

my only last question at this stage is who makes the decisions on liability - presumably HMRC?

let's hope my wife and I survive long enough to spend our way out of too much liability while still being able to hand something on.

thanks again.

Expert:  TonyTax replied 2 years ago.
As I said in my answer, whether a property that you claim to be your main home when you sell it is accepted as such will be based on the facts and, if you disagree with HMRC, you can appeal and take them all the way to a tax tribunal if you wish.
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