CGT Exposure on one of multiple properties

[was]

Hi

Given that HMRC successfully drove by business into the ground and then gave me a tax rebate the following year, I have no qualms about NOT handing over tax that they are NOT entitled to.

My circumstances are a little involved as you will see but I am seeking a definitive answer to my situation.

Property A - Bought in joint names with wife, as principal residence, many years ago.
Currently mortgaged at 65% LTV.

Property B - Purchased in own name, as my principal residence due to separation, 8 years ago. Currently mortgaged at 85% value LTV.

Property C - Purchased in joint names with same wife, 3 years ago.
Achieved via Let-to-buy of Property A, and by also letting out Property B.

Property D - I have now put down a deposit on a new build property, in my name. It will complete in 12-18 months and I will therefore want to sell Property B (my property).

Question :

What do I need to do to ensure that I minimise my tax exposure on the sale of Property B given that I have lived there for 5 years?
My wife and I want to separate finally and are considering exchanging ownerships of the joint properties, ie. She takes property C and me property A, can this be done easily?

Many thanks

Was

[TN]

That does sound complicated!

I suggest you sit down with a professional to go through all this and map out which properties were your own and your wife's PPR at what stages. However, in answer to your question, I doubt you will pay any tax on the sale of Property B.

It looks like it was your main res for 5 years, during a period when you and your wife lived separately due to the separation (so you get a PPR each, rather than only one). The last 36 months will always be treated as PPR, and you should get letting relief for the period it was rented out (I assume you declared the rent?). You'll also have an annual exemption of circa £10k so there will be little, if any, tax.

In terms of the exchanging of interest on Prop A and C, if you and your wife are still married and currently living together then any transfers between you are at no-gain/no-loss. So there would be no tax, but effectively each of you inherit the indexed base cost. If you are not married and/or living together then you would realise a capital gain, but it looks from your post like both Props A and C would qualify as PPR and letting relief for both of you anyway, so this should reduce the tax probably to zero. If not, there is a extra-statutory concession D26 which applies to exchanges of interests which might help you.

You'd also need to think about stamp duty land tax. There are exemptions for transfers on separation or divorce, and separate rules limiting the tax on exchanges, so you might find you're OK on this to if no cash is changing hands.

Let me know if you need any more info, or if you would me to advise formally on the tax implications, help with tax returns etc.

Regards
Tristan

[was]

Hi Tristan

I would be very grateful for your help.

Was