A married couple or civil partners are only allowed one main residence between them. The only or main residence is exempt from Capital Gains Tax (CGT), so if a couple have more than one property they need to decide which one is the main residence if they have all been used by them as a residence. There is a two year window to decide and nominate which one is to be the main residence for CGT purposes.

Where properties are jointly owned, each of the owners may apply various reliefs and exemptions to their share of the gain arising on the sale of their property, including lettings relief which, under current legislation, can be up to £40,000 per person. However, lettings relief has been significantly restricted for disposals after 5 April 2020 and is only available if the owner and the tenant lived in the accommodation at the same time.

The final period exemption relates to the final 9 months ownership of a dwelling (18 months until April 2020) that is, or has, in the past been a person’s main residence, in order to provide a CGT free period in which to sell the property after leaving it. The longer the exemption period is, the more main residence relief may be accrued on two properties. There are special rules which allow up to 36 months relief to people with a disability or who are moving into care.

Generally transfers between married persons or civil partners take place on a no gain/no loss basis.

For transfers prior to 6 April 2020 the receiving spouse/civil partner qualified for main residence relief for any period before the transfer that the property was the only or main residence of the transferring spouse/civil partner so long as the property was the couple’s only or main residence at the time of transfer. However, if it were not the main residence at the time of transfer for the receiving spouse/civil partner, the period of ownership over which any main residence relief was due applied from the date the interest in the property was transferred.

The rules may also work to deny main residence relief on a property which may have been used as the principal residence by the transferring spouse/civil partner in the past, but was never the recipient spouse’s/civil partner’s main home, for example it was used as a residence in the pastbut then let at the time of transfer and afterwards.  In this case CGT would be due on the full gain attributable to the receiving spouse/ civil partner.

From 6 April 2020 the condition that the property is the main residence at the time of the transfer has been removed, so the receiving spouse/civil partner would obtain the same ownership history as their spouse or civil partner.

If you have more than one property or own property jointly, particularly if you are intending to buy, sell or transfer a property, it is important to understand any potential tax exposure.  Our personal tax team can review your circumstances and advise on your tax position.

Should you have any queries or questions in respect of the above, please reach out to your usual Arnold Hill & Co contact, call our mainline on 0207 306 9100 or email our general address – info@arnoldhill.co.uk

The information in this article is believed to be factually correct at the time of writing and publication, but is not intended to constitute advice.  No liability is accepted for any loss howsoever arising as a result of the contents of this article. Specific advice should be sought before entering into, or refraining from entering into any transaction.