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Georgina's Blog

July 2020

Capital Gains Tax has changed - and it may be relevant to you

Tax, as inevitable as death they say, has applied to the gain you make on selling any property that you do not live in for ages. You do not pay tax on your own home that you live in, known as Private Residence Relief. The tax on other property is known as Capital Gains Tax (CGT). You might have a buy-to-let flat, have rented out your own home for a period of time, have inherited a house from your parents or use a house for business purposes. Selling any of these incur CGT when you sell. The difference between the price you paid for your property and the money you get back after selling it and paying off any mortgage is known as the equity. You may have to pay tax on this amount - the amount of capital you gained by owning the house. For example if you bought a buy to let flat in 2000 for £300,000 and it is now sold for £350,000 after costs you will have made £50,000 which will be taxed according to other capital gains you make that year or how long you have owned the property - either way it can be complicated to work out so it is worth using the gov.uk calculator and seeking advice from a tax expert.

If I haven't lost you already, the reason that this is relevant to a family mediation blog is that firstly the CGT needs to be paid within 30 days of selling the house or transferring it. This is speedy by anyone's standards and made more complicated if the money is received in a different tax year (which runs from April 6th to April 5th of each year) than the year that you separate. Secondly the rules have changed so that if you do not live in your house for more than 9 months it no longer qualifies as your Private Residence and you will lose your eligibility for Private Residence Relief. This applies when, for example, a husband moves out and the wife stays in the family home with the children. In this case if they sold their house after a year and made a profit of £100,000 which they decide to divide equally, the wife will not pay tax on her £50,000 but the husband will. So, as ever, it is worth taking advice and then talking all of these things through in mediation to work out the best way forward for you both.