Capital Gains Tax on 2nd Property & Stamp Duty Land Tax

[missannie]

Hi all,

I’d be very grateful for some advice on how best to manage the Capital Gains Tax that I might be liable for, in the event I sell the flat I own. I have read various bits & pieces relating to this, but am getting very confused.

Some background info:

I bought the flat in November 2006 for £190,000.

The flat was my own personal residence, and the only property owned by me until 2011. In January 2011, my husband and I (recently married) purchased our new home which is now our residence. My previous flat has been rented out since March 2011.

Last year my flat was valued at between £250K-£275K and I remortgaged and now have a £212K mortgage on it.

I’m thinking of selling my flat and am expecting to get £250K but have a few questions relating to the best way of managing this and when:

1. Do I have 2 or 3 years of CGT relief ?

2. What and where do I need to register which one as being my main residence if I need to do that? Or is that only if we are still living in both and not letting it out?

3. If I sold the flat in September of 2013, what would I pay in CGT (after renting for 2 years and 6 months)? Or If I sold the flat in the summer of 2013 (having rented it out for 3 years and 6 months? This is obviously dependant on whether you have a period of grace of 2 or 3 years.

4. If I was to gift half of the flat to my husband and pay the Stamp Duty Land Tax would that benefit us? And what would the SDLT be?

5. Would that entitle us to double the CGT relief of approx. £20K?

6. I read also about section 223 of the CGT Act and there was a letting exemption that would allow for a £40K exemption relief - is this valid for me? And if that is the case, I therfore have nothing to worry about as If I sold for £250 I wouldn’t be making £40K profit anyway... right?

Does anyone know anything about this?

Huge thanks in advance
Annie

[section 44]

1. Do I have 2 or 3 years of CGT relief ?

The entire gain should be exempt by reason of private residence relief.

3. If I sold the flat in September of 2013, what would I pay in CGT (after renting for 2 years and 6 months)? Or If I sold the flat in the summer of 2013 (having rented it out for 3 years and 6 months? This is obviously dependant on whether you have a period of grace of 2 or 3 years.

As above.

4. If I was to gift half of the flat to my husband and pay the Stamp Duty Land Tax would that benefit us? And what would the SDLT be?

If it’s a gift then there would be no SDLT (you'd be amazed how many posters don't understand what a gift is).

5. Would that entitle us to double the CGT relief of approx. £20K?

You each have a CGT annual exemption (currently £10,600), if that is what you mean.

6. I read also about section 223 of the CGT Act and there was a letting exemption that would allow for a £40K exemption relief - is this valid for me? And if that is the case, I therfore have nothing to worry about as If I sold for £250 I wouldn’t be making £40K profit anyway... right?

Yes, see above.

[missannie]

Thanks for your feedback

Sorry - one more question, I was under the impression that when there was still a mortgage on the property one had to pay SDLT even if gifting the property?

Annie

[King_Maker]

Thanks for your feedback

Sorry - one more question, I was under the impression that when there was still a mortgage on the property one had to pay SDLT even if gifting the property?

Annie

That is correct, if the donee is assuming responsibility for a % of the mortgage.

However, in your above circumstances, the "consideration is £106,000 (50% of £212,000) which is below the SDLT threshold of £125,000.

[section 44]

I was under the impression that when there was still a mortgage on the property one had to pay SDLT even if gifting the property?

As I said:

If it’s a gift then there would be no SDLT (you'd be amazed how many posters don't understand what a gift is).

[missannie]

Ah right I see..
Thanks again - you've been incredibly helpful
Annie