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bigduckontax
bigduckontax, Accountant
Category: Tax
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I am in a position where I have invested in a property

Customer Question

Hi, I am in a position where I have invested in a property jointly with my son and daughter (The three of us have our names on the deeds) which has risen in value over 7 years. They have both been living there but my daughter moved out approx 2 years ago.
They now want to sell and buy separate houses. The potential profit is approx £300k.
If I am earning approx 35k per year what will my CTG bill be? Also, will I automatically be liable to be taxed on 1/3rd of the profit even if i don't take 1/3rd from the sale.
Also is it correct that I can gift my wife half of my share on the deeds before the sale to give us more allowance?
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. You will be liable for CGT on the gain of 100K irrespective of how much you actually take, less your Annual Exempt Amount (AEA) of 11.1K so say 88K taxed at 18% or 38% or a combination of the two rates depending on your income including the gain in the year of sale. In your case most will be at 28% so a worst case scenario is say 25K of tax due. Your daughter will be in a similar position, but for her last 18 months of ownership she will be deemed to be in residence even if this is not the case. Only 6/84, 7% will attract the tax which will be well below the AEA. She is entitled to Private Residence Relief (PRR) for her period of occupation. Your son escapes CGT through PRR. You could transfer half your ownership to your wife and that inter spousal transfer would be outside the scope of CGT. However, HMRC are likely to look on such a transfer with a very jaundiced eye and you may well need the assistance of a trusted, local professional to fight your case. That would reduce the 100K gain to 50K each less, of course, AEA. I do hope that my reply has been of assistance.
Customer: replied 1 year ago.

Hello Keith, Does the figure you quoted of 28% represent a combination of the 2 tax bands (18% and 38%)? Paul

Expert:  bigduckontax replied 1 year ago.

No it doesn't Paul, it was a worst case scenarion with tax at 28%.

Take your income for the tax year and add the personal allowance. The total derived less your income taxed at 20% will be the element entitled to an 18% rate, the rest will be at 28% which is likely to be the bulk of the gain which is why I gave you the worst case position.

The other danger of transferring half ownership to your wife will be that HMRC will deem it to be undertaken at current market value as at date of transfer so very little of the gain would accrue to her in any event.

Regards

Keith

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 support, Paul.

The key to the 18% is 31725. Take the amount already subject to tax at 20% and the difference between that and 31725 is the portion taxed at 18%.

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