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bigduckontax, Accountant
Category: Tax
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My husband and I have a second property that was transferred

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My husband and I have a second property that was transferred to us when my mother died in 2003. At that time it was worth £185,000.00 and we are hoping to sell it at a price of £265,000.00. We have had family staying in there rent free and we have never lived in the property.
Would we have to pay capital gains tax?
Unfortunately, yes. You have a gain of 265K - 185K = 80K [40K each] less your Annual Exempt Amount (AEA) of 11.1K leaving 28.9K which will be taxed at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale; worst case scenario is a tax bill of a tad over 8K each. The 80K gain is reduced however by any selling costs, estate agent's, solicitor's fees etc,and also the cost of any improvements made eg installation of double glazing, central heating, extensions, but not routine maintenance. I am sorry, but a tax bill is inevitable. You did have 18 months after acquisition to elect which of your residences was to be your sole of main domestic residence for Capital Gains Tax purposes, but you are out of time for that. As you never lived in it Lettings Allowance, an alternative to AEA and available up to 40K is not available and even if it were your family lived rent free. I am so sorry to have to rain on your parade.
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Correction: paragraph 2, line 2; delete 'Allowance' insert 'Relief.'

Thank you for your support.

Just a brief note on how the gain is actually calculated:

You need an acquisition and a disposal price. The acquisition price is the purchase price plus costs of purchase plus any improvements eg installation of double glazing, central heating, extensions etc, but not routine maintenance. The disposal price is the selling price less costs of sale, advertising, estate agent's and solicitor's fees etc, Take one from the other to compute the gain liable to CGT. You declare the gain on your annual self assessment tax return and if it were say in the current tax year it would not be payable until 31 Jan 16.