Hi all,
My girlfriend and I are considering buying a whole house which will be our only home and primary residence. We may then split the house into two - one of which we would continue to live in as primary residence and one we would sell. We'd like to know how this series of transactions may be treated from a tax perspective so we can know whether to proceed.
Questions:
a - can this all be tax free due to PRR, or will CGT be applicable or will income tax be applicable?
b - if CGT tax, how will this be assessed? Given the house is bought as 1 it's difficult to assess the base cost on which to calculate any gain.
c - if income tax, can you still offset costs as you would with CGT (and again, how do costs get apportioned to the house which is sold)
If it helps, the numbers are:
- house is on the market for £1million
- the two houses it splits into to be worth a combined £1.4million
- the stamp duty and renovation costs to be 200k
We'd be grateful for any thoughts. Once we have an idea of the treatment we can consider how best to structure the transaction to legally minimise the tax bill (e.g. which house to sell, what to put in my name and what to put in my girlfriend's name). Once we get an idea we'll likely get some formal tax advice!
Many thanks!
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