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Sam, Accountant
Category: Tax
Satisfied Customers: 14195
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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My wife purchased a house for herself in 1985 approx. Soon

Customer Question

My wife purchased a house for herself in 1985 approx. Soon after she moved in, her mother also moved in and her mother lived there also right up until the mother died in 2010. My wife married me in 1988 and we moved into another house together which I purchased but with both our names on the mortgage. After my wife's mother died in 2010, her house has remained empty (for the last three years). She would now like to sell the house. Is she liable to pay CGT and if so to what kind of sum? The mother was 94 when she died and in poor health.
Submitted: 4 years ago.
Category: Tax
Expert:  Sam replied 4 years ago.



Thanks for your question


Yes your wife will be liable to capital gains as this is a property that ceased to be her main residence over three years ago. Assuming the property is sold in 2013 then the gain will be calculated as follows (although these are general details)



Property owned for 336 months and was main residence for 36 months

So private residence relief (the exempt element of the gain due to this being the main residence) will be 36 months plus the last 36 months of ownership


So the gain will be (sale price less purchase price, which forms the initial gain, from which the acquisition and selling costs and capital improvement costs can be deducted) x 264/336

Then the first £10,600 of the gain is exempt as this will be your wifes capital gain exemption allowance for the year of sale, with the remaining gain liable to capital gains tax. This does not take into account private lettings relief, which may be due if your mother in law paid market rent to your wife (and this was declared to HMRC)


Capital gains will be either 18% or 28% or a mix of both, and the rate at which the gain is charged at, is dependent on what unused basic rate is available from the annual income position.

So for example, an annual income of £30,000 sees £12,475 unused basic rate band (as its £42,475) so the first £12,475 of the gain would be liable to 18% and any remaining gain liable to 28%


Your wife should alert HMRC to the sale of this property - so they can arrange a capital gain declaration after the following 5th April. And any tax due is then paid the following 31st Jan

So if the property is sold before 05/04/2014, then the 2014 self assessment tax return with the capital gain declaration is made after 05/04/2014, and any tax due is paid no later than 31/01/2015.


Please do feel free to ask any follow up questions on the information supplied, but it would be appreciated if you could rate the level of service I have provided as this ensures I am paid, and any feedback or bonus are always most welcome.



Customer: replied 4 years ago.

Thanks Sam,

Your reply was very helpful. The only thing is I should have stated that her house was her main and only residence until 1993 when I bought the house we now live in and her name was put on to my mortgage. So her house was her only house until mid 1993 and therefore the period is 1985 to 1993, which is 8 years plus the last 3 years give 11 years, that is 132 months. Therefore I have changed the fraction to 132/204. This I work out to £155,294 and minus the 10,600 gives 144,694. 18% of that I make £26045 which roughly should be the CGT to pay.



Expert:  Sam replied 4 years ago.



I agree the 132 months of main residence but the total ownership period is 336 months - not 204 as you state.


So its 132/336 not 132/204, so this needs to be rectified