CGT liability on Buy to Let property sale, advice please

[HappyChappyUK]

Background:

In 2002 with my now ex wife, I purchased in our joint names 2 Buy to Let rental properties. We split up in 2006, and had a Deed of Separation in Feb 2007 which listed all our assets and liabilities, at which time the properties were moved from joint names to me solely, and some money from my chunky remortgage and sale of shares was paid to my ex wife. Her brother, who is an accountant, said we needed to be 'together' in the same tax year as the Deed of Separation to avoid any CGT liability at that time. So our Deed of Separation shows we separated Aug 2006. I'm thinking that may have just shifted all liability to me?!

I'm now considering selling 1 of those properties, probably after April.

Purchase price of that property in 2002 was £59,950.
Deed of Separation Feb 2007 lists it's value of £105K.
Mortgage valuation the same month values it at £115K.

Recently sold values on the same development vary wildly, but I'm estimating current sale value of only aprox £130K.

My taxable income is under the £12,750 on my most recent tax return. I privately rent the home I live in, and don't any other property than these 2 BTLs.

ChatGPT (sorry guys) has given me 3 different types of CGT advice on this, so at least 2 were wrong possibly all 3. Hopefully someone here is more accurate with how much approximately my CGT liability is likely to be, and if there is any way to reduce or avoid it please?

Obviously I want to reduce any unnecessary tax bill, especially as there's likely little money left after the hefty mortgage is repaid. As I don't own were I live, is there a way to designate this as my main property to avoid CGT, I'm guessing it's not that simple? Or any advice on how to reduce my bill and if there's any suggestions on a better way to do all this, any help greatly appreciated. Happy to provide any more information needed.

Thanks.


*ChatGPT advise
Firstly, that my CGT would be based from the 2007 Deed of Separation figures to any sale date in the coming months.

Secondly, that 50% would be based on my original 2002 purchase cost and the other 50% would be based on the 2007 Deed of Separation transfer price.

Thirdly, the Deed of Separation figures make no difference, it's going to be entirely based on the original purchase costs of 2002.

[AGoodman]

ChatGPT is no good for tax analysis - not least because the law changes but also because it draws from sources that cover a variety of different circumstances and it can't distinguish.

The law at the time read:

58(1) If, in any year of assessment, —

(a)an individual is living with his spouse or civil partner, and

(b)one of them disposes of an asset to the other,

both shall be treated as if the asset was acquired from the one making the disposal for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the one making the disposal.

So, hints of tax evasion aside, you would be treated as having acquired the properties at the original purchase price so your gain would be £130k - £60k = £70k

As a BTL, you can only discount it by your £3k annual exemption and the balance is subject to 18% at the basic rate and 24% thereafter.

[HappyChappyUK]

Thanks so much for your reply. We were no longer living together at the time of the Deed of Separation which transferred the property to me. We officially split in August 2006, and the Deed of Separation was signed February 2007, at which time all our finances together were finalised in the Deed, including the 2 properties becoming solely mine.

Does this change things?