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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5148
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Can you please advise whether I am liable for capital gains

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Can you please advise whether I am liable for capital gains tax in the following circumstance :

7 years ago we purchased a house for my son to rent from us. The mortgage was taken out on my house not the one we bought for my son. We are now proposing to sell the house to him, not at the market rate but at the amount we have outstanding on the mortgage. The figures are as follows:

1. Original purchase price £165k
2. Current valuation £200k
3. Outstanding mortgage (and proposed selling price) £130k

If I proceed with the sale of the property to my son at £130k am I liable for capital gains tax? The mortgage and the property are both in my wife and my joint names.

Can you advise please

Thanks and regards

Hello and welcome to the site. Thank you for your question.

You will be liable to Capital gains allowance.
The sale to property is to a related party and HMRC will regard the sale at Market value for capital gains tax purposes.

Your gain will be (200-165) = £35k or £17.5k per owner as it is jointly owned.
You will both get gains allowance of 10,900 each and the gain subject to CGT after allowance would be (35,000-21,800) = £13,200 or £6,600 each.

CGT rate at 18%, 28% or a combination of both depending on your total income in the year of sale.

Your maximum CGT at 28% would be £3,696

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 4 years ago.

thank you. Just to clarify....when you say "total income in the year of sale" is that the tax year or calendar year? I have just retired and will only have my pension from February 2014 onwards.

Paul, thank you for your reply.

It is total income in the tax year.
As an example

Chargeable gain per owner
CGT calculation
If income after personal allowances is £32,010
then CGT on gain is taxed at 28% £1,848
If income after personal allowances is less than
£32,010 then some gain will be taxed at 18%
and the balance at 28% - see example below
Assume income after allowances is £27,000
Chargeable gain taxed at 18% 5,010
Chargeable gain taxed at 28% 1,590
CGT £1,347

I hope this is helpful. and other Tax Specialists are ready to help you