Right, Simon, the reason I asked was that had she so occupied then there would have been an entitlement to Lettings Relief (LR), available up to 40K.
The gain is 205K - 55K = 150K; deduct her non cumulative Annual Exempt Amount (AEA), 11.1K leaves 138.9K exposed to the tax. This is levied at 10% or 20% or a combination of the two rates depending on her income including the gain in the tax year of sale. So with an income of 10K then 32K - 10K = 22K @ 10% = 2.2K and the balance 116.9K @ 20% = 23.38, total tax due 22.58K.
Presumably you will have to borrow in the very short term to clear this liability, but your solicitor will have met this contingency often in his practice and can point you in the right direction loan wise.
The gain is actually calculated from the acquisition and the net selling costs so my figures based on bare data may well reduce. The acquisition cost is the cost price plus buying costs including Stamp Duty Land Tax plus any improvements eg installation of double glazing, central heating extensions etc, but not routine maintenance which can offset rental income. As your wife earns below the personal allowance the latter is not of much use. The net selling price is what you receive less costs of sale including advertising.
I do hope that you have found my reply of assistance.
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