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Hello Mike, I'm Keith and happy to help you with your question.
Well you are nearly right! The tax relief which ignores the last three years for Capital Gains Tax (CGT) purposes drops to 18 months from 6 April 2014 so if you act quickly and complete before that date the three year exemption will still apply. If you get caught by the new rule do not despair. CGT will be calculated by the months of ownership and only those months when it was not your sole or main domestic residence less the 3 year or 18 month rule (whichever applicable) chargeable. Capital gains are assumed to accrue evenly over the whole period of the ownership so only a small portion of any gain will be liable to CGT. In addition there is an Annual Exempt Amount of 10.9K this tax year, 11.1K next and also a relief called Lettings Relief (up to a maximum of 40K) to take into account too. Remember, as you bought with your girl friend you will be assumed to be a 50% owner so only half the gain will come into the equation anyway. The other half will be the other half's responsibility and they get the same allowances too.
In the end I suspect that you will find any CGT liability minimal in this case.
Many thanks for this - a couple of follow questions on this if I may:
As I assume it is unlikely to close by 6th April. If I lay out the figures perhaps you could add a little meat to the bones.
I purchased the house for £408k (plus stamp - I assume this does not get included) I am selling for £500k Gross - lets just call it NET to make things easier.
So there is a gain of 92k - which between me and my partner is 46k gain each. If we assume completion the the 1st May this year. What is my likely tax bill on the sale. I am a higher rate tax payer. Is the lettings relief per house or per owner?
Keith - thanks for this last one then.
So my house cost me £408k plus 3% Stamp so £420k - plus legal at £1k
so my total purchase was £421k
my sale should be £500k less fees of say £7k. So total gain is £72k
50% of this is £36k this multiplied by 17/77 is £7.9k per person which would be under my 2014-2015 CGT allowance which would apply also to my girlfriend leaving no tax to pay. Do you concur?
Yes, I concur, as any politician worth his salt would say!
Thank you for your support.