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Where Taxpayers and Advisers Meet

CGT on ex. Council house

Forty45
Posts:3
Joined:Tue Jun 08, 2021 4:40 pm
CGT on ex. Council house

Postby Forty45 » Tue Jun 08, 2021 7:45 pm

Before I met my wife she was living with her mother in a Council house. Her mother qualified to purchase it with a discount, so my wife got a mortgage and did so in 1990.

Her mother didn't work, but was joint mortgagee with my wife, who paid the mortgage. The house was covered by a Deed of Trust to protect both of them and their interests.

Around 1992 my wife moved in with me, but continued to pay the mortgage. Her mother remained living in the house rent free. We paid the mortgage off some years later.

The mother died in 2015 and my wife inherited her mother's 50% share. The house was then registered in my wife and my name. The house is now rented out.

What is my wife's (and my??) CGT position? We are planning to sell the house in a few years.

TIA

Jholm
Posts:162
Joined:Mon Mar 11, 2019 4:22 pm

Re: CGT on ex. Council house

Postby Jholm » Wed Jun 09, 2021 9:53 am

Her cost for CGT purposes will be her 50% share of the cost in 1990 plus the value of the other 50% share inherited in 2015.

CGT is all due on her if you do not have a share in the property. PPR relief may be available for the small period your wife lived n the property.

Tax planning could involve making a deed/declaration of trust, whereby she transfers you 50% of the ownership before sale, allowing you both to make use of the >£12k annual exemption amounts and possibly, reduced tax rates.

pawncob
Posts:4680
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: CGT on ex. Council house

Postby pawncob » Wed Jun 09, 2021 10:34 am

It would seem the house is already in joint ownership.
With a pinch of salt take what I say, but don't exceed your RDA

Jholm
Posts:162
Joined:Mon Mar 11, 2019 4:22 pm

Re: CGT on ex. Council house

Postby Jholm » Wed Jun 09, 2021 4:22 pm

Thanks P, I really need to stop logging on in the mornings!

Essentially the costs for CGT are the same anyway, since the transfer between spouses is exempt from CGT, meaning you acquire their cost history.

Total cost is her share of the original cost in 1990 plus value of share inherited in 2015. Proceeds and costs will be split across you both equally (assuming 50% ownership each).

Any capital enhancements can also be deducted in the calculation.

someone
Posts:479
Joined:Mon Feb 13, 2017 10:09 am

Re: CGT on ex. Council house

Postby someone » Wed Jun 09, 2021 6:48 pm

The law changed recently wrt 'inheriting' a spouses PPR on transfers.

I realise in this case that the PPR is small but assuming already a 50:50 split, would transferring an extra 0.01% give the husband some PPR relief too?

Forty45
Posts:3
Joined:Tue Jun 08, 2021 4:40 pm

Re: CGT on ex. Council house

Postby Forty45 » Thu Jun 10, 2021 8:09 am

Thanks to all for their responses.

My wife paid about £26k (100%) and it was valued at £160k (100%) in 2015. Does that mean she pays CGT on (£80k - £13k =) £67k, less her PPR allowance etc?

Is she liable for CGT from 2015 to the eventual date of sale as well? I assume that could only be on her original 50% and not the inherited 50%.

Am I also liable for CGT from 2015 onwards on 50%?

Jholm
Posts:162
Joined:Mon Mar 11, 2019 4:22 pm

Re: CGT on ex. Council house

Postby Jholm » Thu Jun 10, 2021 9:04 am

You're liable to CGT when the property is disposed of. Nothing is due at present, since you both still own the property.

So....

Sale price: x
Less costs: (93k) - half of the costs you state below
Gain: x

You will also be able to deduct selling cost (eg. agent / legal etc).

It sounds like a transfer took place in 2015, giving you half the ownership. You will therefore, use half of the figures above each.

Forty45
Posts:3
Joined:Tue Jun 08, 2021 4:40 pm

Re: CGT on ex. Council house

Postby Forty45 » Thu Jun 10, 2021 4:59 pm

Great, thank you very much for your explanation.


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