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Second Homes and CGT


Simon690
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I have a house which is in my name and currently rent out and I live in another place that's in my partners name (were not married). This has been the case for the past couple of years and I read somewhere a while back that if you sell the second property within 3 years you don't have to pay Capital Gains Tax but after that you do even if the properties are in different names. As we're now into our 3rd year I'm thinking that I should look at selling up and avoid the CGT but can't find any evidence that the 3 year limit is correct so I'm wondering if I imagined it.

Anyone got any experience of this and can offer some advice?

The other thing I need to do is find an IFA so if anyone has any suggestions on how to pick one that would be handy too.

Thanks :)

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I seem to recall that is the case. There is loads of info on the web about it.

Or, you could just flip it when it came to selling time - i.e. declare it as your primary residence for the last 6 months before you chop it in. That isn't illegal I don't think ... yet.

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Or, you could just flip it when it came to selling time - i.e. declare it as your primary residence for the last 6 months before you chop it in. That isn't illegal I don't think ... yet.

I think that might be difficult if it's rented out, at the very least the taxman would ask some very difficult questions. Normal tax rules apply to me as I'm not an MP :rolleyes:

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Do check but I think even if it no longer is your primary residence then you are OK & can rent out for 3 years provided you sell it within the 3 years won't pay CGT. There is a proviso that you didn't buy it for profit - so no idea how property ladder programme works... This was brought in during the last recession when people were stuck in negative equity to allow some leeway. I think married couple can only have 1 primary residence but not married so never had to worry about that !

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It's not the value of the house that determines the CGT thresh-hold it's the profit that is realised.

If the house is in your name then if I were you I'd 'live' in it prior to sale.

In reality this will mean that you should arrange to pay council tax and bills for a period of up to 6 months, this is expensive but may be cheaper than your tax bill.

You can then use the council tax etc. as evidence to the revenue that the house was/is your primary residence.

Be careful though, they are hotting up on this kind of thing. I recently sold two buy-to-let places and was considering 'living in them' for exactly this purpose, however the @rse fell out of the market and my gains were beneath the CGT threshold!

+++

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Thanks Booster. Unfortunately the caveats littered across the official sites mean that it's looking increasingly likely that I'll need to get some professional advice regarding my specific situation. One the first site it says

"Even if you no longer live in your property, you can still qualify for the full amount of Private Residence Relief, provided that:

  • you sell it within three years of moving out or it no longer being your main home"

Which is great but on the second one it states;

"You might not get the full amount of relief if:

  • You’ve let out all or part of your home (or taken in more than one lodger at a time). But you may be entitled to Letting Relief instead ..."

There are too many ifs, buts and maybes which is not good when dealing with the taxman.

Looking at local property prices there will be a taxable gain (i.e. more than £10K profit) so I need to weigh up the benefit of selling now and clearing two mortgages against waiting (at least 5 years) on the hope that the value goes up sufficiently that it outpaces the cost of the mortgage interest payments + the CGT.

No idea if that makes any sense but at least I'm getting closer to understanding what I need to do :)

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Dansky's ideas were the ones I really meant. I always thought that when I sell my flat I've let I'll "move back in" for six months, then sell if I was liable for tax (which I hope to be!!).

I was advised by my accountant that I had three years of rental before I was liable for tax and not to worry about it for now.

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