Hi.I'm not sure what you mean by "What is the income tax position though?"Even though the property was repossessed, as you will read here, the lender is treated as having sold it on your behalf. The gain or loss will be calculated by taking the disposal proceeds and deducting from those the selling costs if these are passed onto you (legal fees, selling agent fees), the original purchase price of the property, the buying costs (legal fees, survey fees, stamp duty etc) and the development costs. The first £11,100 of gains made by an individual in the current tax year are tax free. The remortgaging is not taken into account in calculating the gain or loss on the disposal of the property.There is nothing you can do tax wise with the mortgage shortfall I'm afraid.I hope this helps but let me know if you have any further questions.
OK so we are left looking at a BIG bill then come January as the purchase price of £182k and the selling price of £615k are what's used? Taking into account selling costs as per your answer
We actually were resident in the property until 2009 - does that impact upon the payment which we will have to make for this?
Although I have been in fulltime employment, I have always completed an online assessment for my tax return and am looking to see if that's still suitable. Likely now that it may not be and that I need to use the services of an accountant to complete it for me.
You mentioned development costs. If they improved the property, they can be added to the purchase price of £182,000.Take a look at HS283 here for information on the main residence and CGT. Divide the gain by the number of months of ownership and then by the number of owners and apply what is in the next paragraph to each part owner's share of the gain.The gain covered by the period that you lived in the property and the gain for the last 18 months of ownership when you didn't live there will each be tax free. As the property has been both your main home and let, you will be entitled to letting relief which will be the lesser of:1 £40,000,2 the gain covered by your period of occupation and the last 18 months of ownership and3 that part of the letting period gain not covered by the last 18 months of ownership.If there is anything left after all the above calculations, then each part owner has the annual CGT exemption to use which was £11,000 for 2014/15.
An accountant or tax adviser should be able to calculate the CGT position for you if you would rather not do it yourself.