CGT when selling properties to fund own home

[jookface123]

Hi all,

Tax newbie here - apologies!

I have 2 properties.

1 - I reside in. Repayment mortgage. have had for 4 years. Purchased for 250k, has 225k outstanding mortgage and now worth about 400k
2 - Is a buy to let property that i have had for coming up to 2 years. Purchased for 187k - outstanding mortgage is 139k. If i extend the lease the flat is probably worth around 290k (investing 18k in doing so). If I don't extend the lease it is probably worth around 260k

I want to sell both properties to fund buying our new home.

This year my wife put down the earning for the property on her tax return. As she was between jobs, she essentially paid very little tax in total.

My salary is around 60K. My wife is now working again and her salary is 27K.

How should I go about things? How much tax will i need to pay? Is it financially better to not renew the lease?

Thanks,

AS

[someone]

As I understand it, in order for your wife to declare all the rental income, she has to be beneficial owner of the property. But you say you have two properties, is that two in joint names or in your name only? Normally, if the property is in joint names then the income would be declared 50/50 unless you've submitted form 17 to HMRC (which I think has to be within 60 days of when you agree to split the income as per the beneficial interest and, I think, you have to send proof of the unequal beneficial interest)

Transferring the beneficial interest to your wife will have stamp duty implications as there's an outstanding mortgage. If you did the transfer before the new 3% rate came in then I think it would have been zero (I think there will be a declaration of trust if you own it a tenants in common in unequal shares)

For CGT the tax charge will fall onto whoever owns the beneficial interest. So if your wife owns 100% (as she declares the income) then you will not be able to take advantage of your 10K CGT allowance - although it is possible to transfer a small share back which would be below the 40K trigger for the 3% stamp duty.

I think the cost of the lease extension will be a deductable cost when it comes to calculating the CGT so, provided the increase in value of the property is more than the cost of the lease extension then you will be better off extending the lease - but I think lease extensions can take 6 months to negotiate and complete.
`