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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15707
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Property A - is main home which I share with my wife and kids.

Customer Question

Property A - is main home which I share with my wife and kids. Have normal Mortgage and so on.
Prperty B - My parents sold to me a few years ago. They still leave in it. Has never been rented. I stay with them when my parents are not well and sometimes I stay there when I am working nights as it is better without kids and save me travel to work about 15 minutes.
My Question is, Can I sell property B and how much capital gains tax will I pay. I fall in the 40 per cent bracket. Prperty was bought for 300k and now is worth 450k.
Thank you.
Submitted: 6 months ago.
Category: Tax
Expert:  TonyTax replied 6 months ago.
Hi. A married couple can only have one main residence between them. It is possible to make an election for one of two or more homes to treated as the main home for CGT purposes but such an election has to be made within two years of the acquisition of a new property. From what you have told me, HMRC would say that the property you share with your wife and children is your man home so if you sold the property your parents live in, the gain which will be the difference between its value when it was sold to you and what you sell it for will be chargeable to CGT. The first £11,100 of the gain will be tax free and the balance taxed at 28%. If your parents property was sold to you at less than its open market value, the difference constitutes a gift for Inheritance Tax purposes and there could be gift with reservation of benefit implications. You can read about those here and here. I hope this helps but let me know if you have any further questions.
Customer: replied 6 months ago.
Hi, Thank you for quick reply. Unfortunately I am not very happy as you have given me answers which only takes me 10 minutes to find on the internet. As a professional and someone who anwers questions here you should have guessed that I am looking for a way to avoid paying capital gains. So maybe I should have worded my question better but if I knew what to ask then I would not be here to ask.
Expert:  TonyTax replied 6 months ago.
I gave the correct answer for your question. You didn't ask for ways to avoid CGT. The only way to do that is to move into the property for at least a year but even then, whether you can avoid CGT will be based on the time you have owned the property, the value when you bought it, how long you live in it and its value now. Even if you do that, HMRC may still tax the gain on the bais that you moved into the property just to avoid CGT and not to make the property your home. The amount of main residence relief you get is proportionate to the periof of ownership, though you will get the last 18 months of wonership as a tax free period if you can say that the property was your main home. Wuth your parents living there, that will be difficult. I deal in tax in the real world. I'm not a non-practicing tax author who might tell you to move in to a property for three months and that will get you out of a CGT liability. There is too much garbage like that being written to sell books I'm afraid.
Expert:  TonyTax replied 6 months ago.
Take a look at example 9 in HS283 to see how main residence relief is calculated.

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