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How can we avoid Capital Gains Tax on empty family home?

ceggleton
by ceggleton 07 May 2012  |  Comments 3 comments  |  Love Love  0 loves

My father wants to sell his house. He bought the house approximately 40 years ago and we lived in it as a family until about 13 years ago, after which my sister stayed in it, until 6 years ago. Since then the house has been empty. He would now like to sell the house but is scared that his pension will be eaten up by capital gains tax. Does anyone know how much he would be eligible for, and how to minimise the impact? I have looked at some guides but none seem to answer these circumstances. He is 70, and on a pension, he is married so he could transfer half to his wife. Is it best if he moves his address back there?

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Comments (3)

  • JoeEasedale
    Love rating 174
    JoeEasedale posted

    A house which was your fathers main family residence up to 3 years ago is free of cgt.

    27 years as main family residence, ignore last 3 years, therefore 10 years not main residence.

    if on standard rate tax cgt would be profit on sale - sale price less costs less purchase price divide by 37 multiply by 10 less cgt allowance of £10600. 18 % of answer is cgt due from the sale.

    Nothing to do with the pension, it will be settled by doing a tax return for the year of sale.

    Posted on 08 May 2012 | Love Love  0 loves Report
  • JoeEasedale
    Love rating 174
    JoeEasedale posted

    If he moves back in - no cgt on sale. If transferred into joint names with wife then double cgt allowance applies.

    Posted on 08 May 2012 | Love Love  0 loves Report
  • MikeGG1
    Love rating 879
    MikeGG1 posted

    As Joe says, it is nothing to do with the pension, unless he is on Pension Credit.

    The CGT liability would be settled from the proceeds of the sale.

    The amount of tax would depend on how much the actual gain is, less expenses of the sale (legal & estate agents). Transferring half to his wife would allow 2 lots of annual exemption. It would also halve the amount to be added to his income to determine whether some of the tax should be at the higher rate of 28%. That would allow both of them to use the balance of their basic rate band.

    If he would exceed the basic rate band and she has more than enough to cover the gain, perhaps more than half could be transferred to her.

    Mike

    Posted on 08 May 2012 | Love Love  0 loves Report

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