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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 own two properties equally as tenants in common.

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My wife and I own two properties equally as tenants in common. The main home has a mortgage. The second home which we bought in 1998 for £172,000 has no mortgage but is subject to capital gains tax on both of us under a complex formula less money spent on improving it increased by RPI.
If I transfer the second property to my wife who will live in it full time ,will this property which will become her main property, be free of capital gains tax from the date of transfer?
My wife's share in the main property will be transferred to me and I would take over the mortgage. This would become my main property and I would live in it full time.
I am not an M.P.
Regards ***** *****
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

Please note that there is no indexation allowance or taper relief available to reduce gains made by individuals on disposals after 5 April 2008.

A married couple who are not separated can only have one main residence between them for Capital Gains Tax purposes. Unless you made a joint election within two years of acquiring the second for one of the properties to be treated as your mian home, the matter as to which property qualifies for main residence relief will be decided on the facts if and when one of them is sold. Transfers of assets between the parties to a marriage are tax neutral, ie there is no gain or loss.

Take a look here for information on the tax rules for married couples where they are living together as a couple and where they separate and/or divorce.

I hope this helps but let me know if you have any further questions.

Customer: replied 2 years ago.

Thanks. Good service. I assumed that it would come down to separation or divorce. I shall read this carefully.

Clearly, the Revenue would want cast iron proof or we would all be at it.

It is mooted that the Tories are thinking of excluding the main house from inheritance tax which would complicate things. Why don't they realise that it is the 40% rate which is the killer. Half a million to each spouse plus 10% on the next million and most people would not bother about the tax.

Expert:  TonyTax replied 2 years ago.
Thanks.

I think 20% to 25% would be a fair rate for IHT, though your idea has merit too. 40% is way too high. The problem is so few estates are liable to IHT so the opponents of change would see it as pandering to the well off, rightly or wrongly.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15883
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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