You should refer to HS283 here
for information on the main home and CGT.
If you sell the property for £950,000 in August 2015 having paid £180,000 to buy it, you will make a gain of £770,000, £385,000 for each of you. Once you deduct the costs of buying and selling (legal fees, stamp duty, survey fees, selling agent fees etc), the gain for each of you will be lower. By August 2015, you will have owned the property for 250 months of which you will have lived in it for 189, let it for 57 and it will have been vacant for 4. The following will apply to each of you:
The gain for the period the property was your main home will be exempt from CGT. That accounts for £291,060 (£385,000 / 250 months x 189 months). The remaining non-exempt gain of £93,940 is split as to £87,780 to the letting period and £6,160 to the vacant period.
As the property has been both your main home and let, you are entitled to a further deduction called letting relief which is the lesser of:
2 the gain for the period that the property was your main home, £291,060 and
3 the gain for the letting period, £87,780.
Letting relief of £40,000 will reduce the remaining non-exempt gain of £93,940 to £53,940 and the annual CGT exemption of £11,100 will reduce if further to leave you with a net taxable gain of £42,840.
There are two rates of CGT, 18% and 28%. The rate or combination of rates that you will pay will be dependent on the level of your income in the tax year that the property is disposed of. If the sale occurs in 2015/16, one of the following scenarios will apply:
1 If the sum of your income and the net taxable gain is £42,385 or less in 2015/16, then all the taxable gain will be charged to CGT at 18%.
2 If your income alone is £42,385 or more in 2015/16, then all the taxable gain will be charged to CGT at 28%.
3 If your income alone is less than £42,385 in 2015/16 but greater than £42,385 when the net taxable gain is added, then part of the net taxable gain will be charged to CGT at 18% and part at 28%.
I hope this helps but let me know if you have any further questions.