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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am planning to sell a flat I bought just before I got married.

Customer Question

I am planning to sell a flat I bought just before I got married. The property is in my sole name and although we lived in the flat for a number of years after we got married we have let it as a rented property for about 15 years. Do I need to change the title deed to both myself and my wife in order to benefit from capital gain tax relief ? Can I gift 50 % of the flat to my wife ? What is the best thing to do ?
Submitted: 11 months ago.
Category: Tax
Expert:  TonyTax replied 11 months ago.
Hi. How many years did you live in it before and after you got married?
Customer: replied 11 months ago.
Purchased in 94 got married in 98 and lived in it until 2000/2001.
Expert:  TonyTax replied 11 months ago.
Thanks.
Leave this with me while I draft my answer.
Customer: replied 11 months ago.
Just by way of update. We purchased the freehold through enfrenchisment last year.
Expert:  TonyTax replied 11 months ago.
You should refer to HS283 below as part of this answer.
https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief
The problem you have is that unless the property is put into joint names when you are both living in it and it is your main home, your wife will not benefit from main residence relief and letting relief that you will based on your occupation of the property as the owner. In effect, that will mean you will get half as much main residence relief and letting relief as you would if you sold it whilst it was in your sole name. Take a look at the links below for more information on this:
http://www.hmrc.gov.uk/manuals/cgmanual/cg64950.htm
http://www.taxationweb.co.uk/tax-articles/property-taxation/main-residence-relief-and-inter-spouse-transfers.html
As of now, as a sole owner, you will get main residence relief for the period that you lived in the property, 7 years or so. You will also be given main residence relief the last 18 months of ownership and letting relief of up to £40,000 for that part of the letting period not covered by the last 18 months of ownership. Your wife would get none of those. The only deduction she would get is the annual CGT exemption of £11,000 which you would also get. See example 9 in HS283 to see how main residence relief and letting relief are computed.
There are two rates of CGT, 18% and 28%. The rate or combination of the two rates that a taxpayer pays is dependent on the level of their income in the tax year of disposal.
Whether a transfer into joint names would be beneficial or not depends on the level of the gain, how much main residence relief and letting relief is due and the levels of your own and your wife's respective incomes.
I hope this helps but let me know if you have any further questions.
Expert:  TonyTax replied 10 months ago.
Hi, I'm just checking in to find out if you need further advice or clarification.

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