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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 partner and I jointly ( and equally ) own a house which

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My partner and I jointly ( and equally ) own a house which has been our home for 20 years. At the end of January 2014, I ( just in my name ) bought a second house. The second house soon became the place where we both lived most of the time, while we spruced up the first house for sale.
We are nearing the point of exchange of contracts on the first house, but the process is dragging on a bit. Soon we will reach the magic 18-month time limit for CGT exemption on this sale ... but I have seen 2 years mentioned elsewhere ... what are the true limits, and can I do anything to avoid CGT liability for a little longer ?
Thanks for your question
I am afraid its 18 months are there are no exceptions on this (used to be 3 years until April 2014)
But on the plus side you will form an exemption (under private residence relief) for the time you lived there plus the last 18 month of ownership and BOTH be due the annual exemption of £11,100 each, which should render any gain very small if not NIL
But I am afraid there is nothing you can do to avoid capital gains after that 18 month period.
Let me know if I can be of any further assistance
Customer: replied 2 years ago.

Thanks Sam.

The HMRC website takes you round in circles and doesn't explain it well.

If I understand you correctly, Private Residence Relief would apply from the beginning of our ownership up to the end of our period of occupancy PLUS 18 months ... and only then is CGT chargeable on any increase in value between that date and the date of final disposal. Have I got that right ?

Thanks, Alan

Hi Alan
You have it spot on! Only it works on the basis that the gain has ]been accrued over the whole period of ownership and not just from the end of the 18 month period of leaving the property until the date of sale.
So if you bought for £150,000 and sold for £300,000- there would be an initial gain of £150,000 from which you could deduct all the costs to sell and buy (so estate agent fees and legal fees) and also the costs of any capital improvements such as a new kitchen or bathroom.
Then for the private residence relief - the time you lived there plus the last 18 months of ownership/total period of ownership x gain (after all the costs have been deducted) = gain to be considered.
Then this is split 50:50 between you and your partner - and then each of you have the first £11,100 exempt, with then only any remaining gain liable to capital gains tax.
The rates of capital gains are 18% or 28% or a mix of both, and the charge is determined by your annual income (so if a higher rate taxpayer all the remaining gain will be charged at 28% and if a basic rate taxpayer then some/all at 18% up the basic rate band threshold, and any remaining gain at 28%
Let me know if I can be of any further assistance. But it would be appreciated if you could rate the level of service I have provided.
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