Q My sister and I share ownership of what was our family home. We inherited the property in 2009 and have rented it out since 2011. We have split the rental income 50/50 since then.
My sister would like to put the house up for sale and I would like to buy her half of it and continue renting it out. I live abroad. My sister lives in the UK.
What would we have to pay in capital gains tax if the house was sold for its rateable value of £160,000? It was valued at £210,000 in 2009. LM
A If your sister were to seriously shortchange herself by selling you her half of the property for its rateable value – or rather, its value for council tax purposes – it would make no difference to the capital gains tax (CGT) bill. Even if she gave you her half for nothing, the gain would be worked out by using the market value of the house at the date of disposal – whether by gift or sale – minus its value of £210,000 at the time you and your sister inherited it in 2009 minus selling costs such as legal fees. For your sister, CGT would be due on half of this gain.
After deducting the annual CGT-exempt amount of £11,100 (in the 2015-16 tax year) from half the gain, your sister would pay CGT at 18% on the remainder if she is a basic-rate taxpayer, or 28% if she pays tax at either of the higher rates of income tax. If you were to buy her half, there wouldn’t be a CGT bill for you because you would be acquiring rather than disposing of an asset.
You might face a CGT bill if you both sold the house as, since 6 April 2015, even if you are non-resident for UK tax purposes, you are still liable for CGT on the disposal of residential property.
As a non-resident landlord, if you continue to receive rent on the property you are also liable for UK tax on that income. You pay the tax either by filling in a self-assessment tax return or by receiving rent net of tax, which means your tenant or letting agent deducts tax from the rent before paying it to you.
