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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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With my husband I bought a family house for £4,100 in 1967.

Resolved Question:

With my husband I bought a family house for £4,100 in 1967. On his death in 2001 I redecorated and let the house through a housing association in 2003 and bought a smaller
House for myself. I would now like to sell the family house which I believe is now worth
approximately £335,000. The smaller house is worth approx. £125,000. How much capital
gains tax would I be liable for? Is there any way to offset part of the total like using my husband's tax allowance as in inheritance tax? I don't think it's possible to "swap" the
houses any more!
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.

Hi.

Take a look at HS283 for information on the main residence and CGT.

You will almost certainly have a CGT liability. The cost for CGT purposes of the 1967 house will be the sum of 50% of the 31 March 1982 value (I assume it was in joint names with your late husband) and 50% of the value in 2001 when you inherited your late husband's share.

The gain for that part of the ownership period between 31 March 1982 and when you moved out in 2003 will be exempt from CGT due to your occupation of it the house. You will also be given exemption from CGT for that part of the gain covered by the last 18 months of ownership. As the house was your main home and it has been let, you will be entitled to a further deduction called letting relief of up to £40,000. See Example 9 in HS283.

If after all those deductions, there is any gain left, the first £11,100 of that will be tax free due to the annual CGT exemption. Any balance will be charged to CGT at 18%, 28% or a combination of the two rates depending on the level of your income in the tax year you sell the property. If you put the house into joint names with your current husband before you sell it, it might or might not reduce your overall CGT liability. However, if you do that, you will lose half your entitlement to main residence relief as I'm assuming your husband has never lived in the house you wish to sell and will not, therefore, be entitled to any main residence relief. If, by your "husband", you are referring to your late husband, you cannot transfer any allowances from him I'm afraid.

I hope this helps but let me know if you have any further questions.

Customer: replied 1 year ago.
What is the significance of 31st march 1982?Re. the first £11,100 tax free due to annual c.g.t exemption, won't that allowance have already
been used when I declared rent received in my annual tax return?
Expert:  TonyTax replied 1 year ago.

CGT started in 1965. It was rebased to 31 March 1982 so that pre-31 March 1982 gains are tax free and taxpayers don't have to go back into ancient history to trace the cost of assets.

The £11,100 allowance is the annual CGT exemption which you only use if you have capital gains. The personal allowance which is used against income is £11,000.

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