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December Questions and Answers

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Newsletter issue - December 2016.

Q. My wife doesn't work. Can she transfer her unused personal tax allowance to me?

A. Since April 2015, it has been possible for a spouse or civil partner who is not liable to income tax or not liable above the basic rate for a tax year, to transfer part of their personal allowance to their spouse or civil partner, provided that the recipient of the transfer is not liable to income tax above the basic rate.

The transferor's personal allowance will be reduced by the same amount. For 2015/16 the amount that could be transferred was £1,060, rising to £1,100 for 2016/17. The spouse or civil partner receiving the transferred allowance will be entitled to a reduced income tax liability of up to £220 for 2016/17 (£212 for 2015/16). Note, however, that married couples or civil partnerships entitled to claim the married couple's allowance are not entitled to make a transfer.

Q. I am currently in the process of purchasing a property which includes a separate granny annex. Since there is only one title number for the whole property, can I apply for stamp duty land tax multiple dwelling relief (MDR)?

A. Broadly, if the granny annex is an independent dwelling, then it will count for MDR. If it cannot exist independently of the main house, then MDR will not be available.

The HMRC Stamp Duty Land Tax Manual states (SDLTM29955):

'For the purposes of the relief a "dwelling" means a building or part of a building which is suitable for use as a single dwelling or is in the process of being constructed or adapted for such use.'

Special rules apply to certain types of dwellings, including halls of residence and 'off plan' transactions. See the HMRC Stamp Duty Land Tax Manual for further information.

I bought a flat in 2000 and paid £100,000 for it. I left the UK in November 2003 to work overseas and it has been rented out since then. I have not returned to the UK since I left and I now live permanently in France. I am thinking of selling my UK flat, which is now valued at £300,000. What are the tax implications of doing this?

A. The tax implications for non-UK residents selling UK residential properties changed in relation to disposals after 5 April 2015. Prior to then, there would have been no UK capital gains tax to pay. Unfortunately, after that date, the disposal will be subject to capital gains tax based on the value of the gain between 6 April 2015 and the date of sale. There are different ways of calculating the gain and you can use HMRC's online calculator to work out the amount of tax due. You must tell HMRC within 30 days of conveyance, for example no later than 31 July if you convey on 1 July. HMRC may impose penalties where the reporting deadline is missed and interest will be payable on tax not paid by the normal due date. See the HMRC website at https://www.gov.uk/guidance/capital-gains-tax-for-non-residents-uk-residential-property for further information.