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Am I liable for capital gains tax on this property if I sell it?

Question My wife and I bought a property in 2003, and it has always been our principal private residence. In 2007, I gifted my wife a sum of money which she used to purchase a property for £320,000, which we have used as a second home and, for a period she rented out. She is the owner, and the title is registered in her name. We are planning to sell our main residence, and there will be no capital gain to consider. Once we have sold the property we are planning to move into the second property as our only residence. At that point, my wife intends to gift the property to me in its entirety. This property will be worth around £520,000. This will be my only residence, and I have not previously owned it or had any legal interest in the property. Am I liable for capital gains tax on this property should I sell it?

Arthur Weller replies:
Have a look HMRC’s Capital Gains manual at www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64950 and www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64955. You are best off if your wife transfers to you just before you move into the second property and make it your main residence. If you do so you will take over her base cost for the property (£320,000), but your date of acquisition will be today's date (in 2017), not 2007, and since you are transferring before you move in and make it your main residence, you will not take over her principal private residence ‘history'. Therefore, if you decide to sell the property at some point in the future, the principal private residence rules will look back to 2017 and not to 2007. Since you (presumably) will have lived in it from 2017 onwards as your main residence, there should be no capital gains tax when you sell it in the future.


Property Tax Insider This sample question and answer is taken from Property Tax Insider, a monthly UK tax saving magazine for landlords and property investors.

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