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bigduckontax
bigduckontax, Accountant
Category: Tax
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When my in laws bought their council house they found it easier

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When my in laws bought their council house they found it easier to put my husband's name on the mortgage as he was living at home and was younger for payment purposes. When they paid off the mortgage, as he was still unmarried they included his name on the deeds. Now my father-I-law is trying to put his affairs in order and it was decided that my husband would relinquish all claim to the house. My husband's inclusion has only ever been nominal and no money has exchanged hands between his parents and him in connection to ownership of the house.
The family has, however, been told that he will be liable to capital gains tax on his 'share' of the property. It is my understanding that the tax is paid on capital gain and my husband has received no financial benefit from the property. How can he have to pay for something from which he has, and will, receive no benefit; in fact he loses a potential asset? In due course he will, along with all other family members, receive an inheritance in anything that is left (given that it is still possible that my father-in-law will need to have Care in future and his only financial asset is the house)?
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.
Benjamin Franklin once quipped that in life there are but two certainties, death and taxes. Capital Gains Tax (CGT) is a thoroughly nasty little tax liable to jump up and bite at the most unexpected times as it is doing here.
On the assumption that the property in question was never your husbands sole or main domestic residence then the advice you have received is correct; he is liable for CGT on any gain made on disposal of the property. This 'gain' is the net sale price less the acquisition price. The latter is the original purchase price plus purchase costs plus and improvements (eg installation of central heating, double glazing, extensions etc).
Only the proportion of the ownership is chargeable (ie if he owned half then half the gain is taxed) and furthermore if he lived in the house then that period of occupation would be adjusted out also. He also has an Annual Exempt Amount (AEA) of 11.1K to offset the gain and if he received rent then he might be entitled to Lettings Relief up to 40K also instead of the AEA. CGT is at 18% or 28% or a combination of the two rates depending on his income including the gain in the year of sale.
The future possibilities of an inheritance are irrelevant; anything might happen in the meantime.
I am so sorry to have to rain on your parade.
bigduckontax, Accountant
Category: Tax
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Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 1 year ago.
Thank you for your excellent support.

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