Often people own a share in a second property that someone else lives in.
Normally, this has been done to help younger family members get on the housing ladder.
If you are a part-owner and you do not live in that property, upon sale of that property, you will need to pay Capital Gains Tax (CGT) on any gain made in respect of your share.
If the other part-owner is living in the property and using it as their main private residence, there is something that you can currently do to minimise the CGT.
You could sell your share to the part-owner, not all in one go, but bit by bit over a number of consecutive tax years. This means that when the part-owner who is resident sells the property, they can sell free of CGT because of the Principal Private Residence Relief.
But, is it still possible or advisable to do this?
Yes, it is, but you need to be aware of a number of issues that may be affecting you shortly as joint owner.
First, as of April 2016, there will be a further 3% stamp duty payable on any property purchased which is not your first home. And that 3% stamp duty applies to the entire property transaction.
Secondly, at the time of purchasing such a property in joint names, if one of the parties, is a first-time-buyer, they may well not be able to claim any reliefs which they ordinarily would do on the purchase of their first home.
The first-time-buyer in this situation will not be able to benefit from the government’s recently announced ‘Right to Buy ISA Scheme’.
Depending upon your circumstances, if you would like to help a family member purchase a property, it may now be better to help by lending them the money and securing that loan on the property by way of legal charge (like a mortgage) rather than being a joint owner of the property.
This briefing was posted on 25 January 2016.