In November 2010, my wife and I sold a flat that we had been letting for a few years after previously living in it as our main home. Here are the details: March 1995 - I bought it for £70,000. April 2006 - Flat put into joint names and valued at £200,000, available for let. November 2011 - Property sold for £240,000. So am I right in thinking that for me, the appropriate gain is £120,000 - £70,000 = £50,000 (ie half the sale price minus the original purchase price)? And for my wife, the appropriate gain is £120,000 - £100,000 = £20,000? Also, because the flat was our main residence before we let it, we only pay tax on a small proportion of the gain: for me, only 20 out of 140 months count, so only 14% of the £50,000 ie £7,000. As this is below the exempt amount, do I have any tax to pay at all? For my wife, I'm not sure what the situation is. It was her main residence for about five years before we moved out, but the property was only put into her name as we left. Does that entitle her to residential relief? If not, how should we treat it? If she does, she would get 36 out of 56 months, leaving 20/56 to pay = 35%. In which case, her gain is only 35% x £20,000 = £7,000, so once again below the exempt amount and no tax to pay?

If you look on page CG64950 of the HMRC Capital Gains Manual: http://www.hmrc.gov.uk/manuals/cgmanual/CG64950.htm you can see that if a residence is transferred between a husband and wife who are living together, and the residence is their only or main residence at the date of the transfer, then the period of ownership of the transferee is treated as beginning at the beginning of the period of ownership of the transferor. This applies for the purpose of computing private residence relief. Assuming you transferred to your wife just before you moved out of the property, this will apply to you, and you and your wife will have the same capital gains tax (CGT) computation. Assuming you sold in November 2011 (not 2010) you owned the property for 200 months. The gain was £170,000 (£240,000 - £70,000). That is £850 per month. The first 133 months (until April 2006) you actually occupied the property, and the last 36 months, are always exempt, so there is only a liability for April 2006 to November 2008, a period of 31 months. This equates to £26,350. If you rented out the property in this period then you will have the letting exemption available to you to reduce this gain. If it reduces the gain to below £10,600 each (the CGT annual exemption, if not already used elsewhere), then you have no CGT to pay.