Q My husband bought a property in 2000 in his sole name. In 2002 we got married and in 2005 we went to live abroad. While we were away, we let the property. We came back to the UK earlier this year and lived with my mother for a few months, during which time my husband unexpectedly died.
He has left the property to me and I am in the process of applying for probate. In the meantime, the tenants are moving out but I don’t want to live in this property as it brings back too many memories. I don’t have another property and would like to sell the house and settle somewhere else. The house will eventually be in my name. Will I be liable for capital gains tax (CGT)? Or do I need to live in it for a certain period of time – if so for how long? AB
A There could be a CGT bill but how much depends on the amount of the gain, which depends when you acquired the property. If you were made joint owner of the property when you married your husband, you would be deemed to have acquired it at the same date as your husband did. So the gain would be the property’s sale price less what your husband paid for the property in 2000, less various expenses such as legal fees and any stamp duty paid when it was bought.
The first £11,000 (in the 2016-17 tax year) of any taxable gain – which is likely to be substantial if you have to use the 2000 value of the house – is tax-free, but you’ll have to pay tax on the rest. Moving back into the house won’t stop you from being liable for CGT and there is no set time that can make that happen. You might, however, qualify for “private residence relief” for the time you lived in the property and also for “lettings relief” because you let the property for a period (more information is available on the UK government website).
However, if the house was still in your husband’s sole name when it was left to you, the date you acquired the property is taken as the date of your husband’s death. This means you can avoid paying CGT if the difference between the value on the date of death and its sale price (less various other expenses) is less than the CGT exempt amount of £11,100. If it is more than that, you’ll pay tax at 18% on the amount over £11,100 if you are a basic-rate taxpayer, or at 28% if you are a higher-rate taxpayer.
