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bigduckontax
bigduckontax, Accountant
Category: Tax
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My husband is selling his house, he has made £100,000

Customer Question

Hello
My husband is selling his house, he has made £100,000 profit on the house. I am not on the mortgage. He bought the house in 2007 with his dad on the mortgage, we married 2013 and the profit from this house will be our deposit on the next house we buy together. I am not a home owner.
Will we have to pay CGT? If so how can I work out how much?
Thank you
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.

Hello, I'm Keith and happy to help you with your question.

Forget about the mortgage, as far as CGT is concerned it is irrelevant. It is the 100K gain that matters.

If he occupied the house as his sole or main domestic residence he is entitled to Private Residence Relief (PRR) which relieves CGT at 100%.

If his Father was also on the deeds as an owner then the same rule regarding PRR applies to him. If, however, he did not so reside then he would be subject to CGT for 50% of the gain, 50K. After deducting the Annual Exempt Amount for 15/16 tax year of 11.1K that leaves 38.9K liable to the tax. This will be levied at 18% or 28% or a combination of the two rates depending on his Father's income included the gain in the year of sael. A worst case scenario is a tax bill of a tad under 11K [10.892K to be exact].

I do hope that I have shed some light on the position for you. If your Father merely lent him the money then, of course, he has no title and CGT does not arise.

Customer: replied 2 years ago.

Thank you for such a quick reply.

So the CGT does not apply to me? I thought it was because we were married that I would have to pay it?

his father only went on the mortgage as a gaurntor, he never lived in the property.

my husband also spent £30,000 on the extension so I guess it's not 100% profit, just £70,000

Expert:  bigduckontax replied 2 years ago.
You have no CGT liability in this matter.
If his father was on the deeds of the property then he is liable for the tax as I told you in my answer. CGT is a thoroughly nasty tax which has the tendency to rear its ugly head unexpectedly.
If he merely guaranteed the mortgage but was not an owner with your husband then he has no CGT liability.
For your information the gain is calculated as follows. The disposal price is the net selling price. The acquisition price is the purchase price plus purchase costs plus improvements and this total deducted from the net selling price to calculate the gain which, in this case would be reduced by 30K. The possible taxable gain is thus 100K - 30K = 70K / 2 = 35K. Deduct the AEA leaves 23.9K, taxed at 28%, worst case scenario a tax bill of 6.692K.
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.