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bigduckontax
bigduckontax, Accountant
Category: Tax
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In 2011, my boyfriend moved in with me, as I could not

Customer Question

Hello
In 2011, my boyfriend moved in with me, as I could not sell my house to move in with him. He is self employed but on a very low income (due to learning difficulties, as a result of a crash) and is in receipt of Tax Credits.
In October 2013 my neighbours tiny bungalow No.4, a one bed, one kitchen/lounge, shower room came on the market so my partner and I bought it for £30,000(his first house purchase) in both our names with the intention of doing it up and moving in.
Although my house has been actively advertised during 2013 until Christmas and again since May 2014 I still have not sold.
My partner wanted to put the other property (No4) on the market as our money is tied up, making it difficult for us, my partner moreso.
Low and behold we have had an offer on my house No.3, this week!
As my partner now really needs the money to pay off debts, he doesn't want to wait and still wants to sell No.4 now, which we have had valued at £60,000 a few weeks ago. I think it will sell quickly as it is a nice little house
Which brings me to my questions,
1. If we wait until mine sells and move in No.4, we won't pay capital gains, True/False?
2. If we sell No.4 before mine is completed, how will we stand capital gains wise?
3. I see we have an allowance of £11,100, is this each?
Thank you Susan
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello Susan, I am Keith, one of the experts on Just Answer, and happy to help you with your question.
1. The sale of your house would attract Private Residence Relief (PRR) which relieves Capital Gains tax at 100%. You have an 18 month time allowance during which you are deemed to be in occupation even if this is not the case. Even HMRC realise that you cannot sell a house as quickly as you can a car.
2. The 18 month rule would apply. Any time utilised in refurbishment, if any, would be added to that. CGT would be time proportional and the gain would be split 50/50 and each of you have an Annual Exempt Allowance of 11.1K to offset any gain. This would be true were you married too.
3. See my response to 2 above.
I do hope I have assisted you with your question.
Customer: replied 2 years ago.

thank you for your reply

I seemed to have missed putting the 1st part of my letter to you.

Hello, my name is Susan,

I have a capital gains question.

I was on my own, in my house (No.3) and have had it on the market, on and off since 2009. The stairs are the problem and I do not need the three bedrooms. I am now a 'housewife' and do not pay tax.

I do not understand what is mean't by 18 month time allowance, would you explain further. Also as I do not pay tax presently could I use my personal allowance in any way?

Susan

Expert:  bigduckontax replied 2 years ago.

The 18 month rule is that for the last 18 months of ownership you are deemed to be in residence wvwn if this is not the case. It is a CGT concession.

CGT is levied at 18% or 28% on the gain after deduction of the Annual Exempt Allowance of 11.1K. Its effect on a non tax payer is that the basic tax band raises the 18% CGT threshold to GBP 31765 of the gain, anything above that is taxed at 28%.

Please be so kind as to rate me before you leave the Just Answer site.

Customer: replied 2 years ago.

Sorry, I am not getting it.

so if i sell the little one before mine will I pay cgt.

Expert:  bigduckontax replied 2 years ago.
You will be liable for CGT; what is the selling price please?
Customer: replied 2 years ago.

lets say £60,000

Customer: replied 2 years ago.

how would it affect my partner?

Expert:  bigduckontax replied 2 years ago.
In my answer which seems to have got lost in the Just Answer system.
Expert:  bigduckontax replied 2 years ago.

Here we go again!

60K - 30K / 2 = 15K gain each

15K * 11.1K = 3.9K, tax at 18% = GBP 702 each [may be more for your partner depending on his income including the gain in the year of sale].

Customer: replied 2 years ago.

yes that is what I got it to.

but he only owns one house?

Expert:  bigduckontax replied 2 years ago.
No, he owns half a house with you.
Customer: replied 2 years ago.

ahh, so he will also have to pay cgt on half a house? lol

maybe we should move in as planned then we wouldn't pay anything. If we did, would there be any time tome limit before we could sell

Expert:  bigduckontax replied 2 years ago.
Yes! CGT is a thoroughly nasty tax which can rear its ugly head quite unexpectedly. I had a case some time ago where a Father had lent his son half the purchase price of his house but had put himself on the deeds an a Joint Tenant also. When he gave his share to his son it cost him 39K in CGT so to do; ouch!
There is a consensus of opinion amongst experts on this site that a minimum occupation period should be 6 months although a year has been bandies about to be on the safe side.
Customer: replied 2 years ago.

is there any way to find this out for sure?

Expert:  bigduckontax replied 2 years ago.
I suspect that you are referring to the time that occupation must occur to avoid CGT. There is no hard and fast rule, but 6 months is generally considered to be the minimum. Many experts on this site have recommended a year to be on the safe side.
Sorry to have to be so vague, but that is the reality.
Customer: replied 2 years ago.

Thank you for your help.

I am sorry I didn't respond last night but I fell asleep!

Susan

Expert:  bigduckontax replied 2 years ago.
No problem Susan, delighted to have been of assistance.
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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