My wife and I lived separately for 11 years, but now plan to sell one home and live together. Must we pay capital gains tax?
My wife and I have lived separately in our own homes for 11 years because we both had children from previous relationships.
However we are now planning to sell my house so we can live together in hers, sometime in 2016. I have looked through the Capital Gains Tax rules but I am still not sure how it impacts me in this situation, if at all.
We have never declared to HMRC which is the main residence as there was no main residence. Will we have to pay Capital Gains Tax?
R.J. By email.
Moving in: The reader asks whether there will be capital gains to pay when he moves into his wife's house
Philip Scott of This is Money replies: It is well documented that buy-to-let investors selling one of their investment properties will always be hit with a capital gains tax (CGT) bill. The CGT rate can be either 18 or 28 per cent, as it depends on whether you are a basic or higher rate taxpayer, as well as the size of your gain from the sale.
But homeowners selling their main private residence – in other words the property where they live - enjoy capital gain tax (CGT) relief. This tax break is known as principal private residence relief’.
Each person is entitled to one Principle and Private Residence (PPR) at any one time, which under normal circumstances, benefits from capital gains tax relief on sale. However married couples are entitled to only one PPR between them and only if they are living together. But in your case you will need to talk to HRMC.
Danny Cox, chartered financial planner at Hargreaves Lansdown, adds: During the period of marriage, only one of the two properties is entitled to be nominated as your main residence. In this case, no capital gains tax will be charged if neither property is sold.
However to determine exactly what period of which property is chargeable and which qualifies for PPR, you should go to your local inspector of taxes for a ruling.
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