Capital gains tax on a second property

susantrebor

We have lived in this property for 2 years, our other property we wanted to sell but with the poor market, failed to do so. This house has been rented. If we tried to sell the house now, without moving back in, would we have to pay 40% tax on any profit we made on this house, despite the fact it is not worth the same amount as 2 years ago? But it is worth allot more than when it was bought 15 years ago. I know what I'm trying to say, but having difficulty puting it into words. If anyone can make sense of this please help?:o

ognum

You don not pay CGT on your main home. If the place you are trying to sell is your main home then no tax if it is not then you are subject to capital gains tax, it all depends on which is you main address.
If CGT is payable then you will pay on the profit you have made. It doesnt make any difference if it was worth more 2 years ago you pay on your profit when you make it. You need to find out if you can offset any profit but otherwise the tax is 40%.

noh

ognum wrote: »

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but otherwise the tax is 40%.

No the current CGT rate is 18%

http://www.hmrc.gov.uk/rates/cgt.htm#1

marvin

But can you do an MP and flip your main home sell it then flip back to the other one?

anselld

You don't even have to be an MP or flip!
Principal Private Residence relief extends three years after you moved out. After that you are still covered for some time through Private Letting Relief but the sums are more complicated. Read How To Avoid Property Tax by Carl Bayley or ask your local [STRIKE]MP[/STRIKE] accountant.

anselld

Actually, reading your post again it is not entirely clear if you own both properties or is the one you are living in now rented?

susantrebor

anselld wrote: »

Actually, reading your post again it is not entirely clear if you own both properties or is the one you are living in now rented?

We do own both properties, we were trying to downsize, but got caught right at the wrong time with the proberty slump. I think our best option now is to move back until that is sold, and rent out the second property until the 1st one is sold.:o

anselld

susantrebor wrote: »

We do own both properties, we were trying to downsize, but got caught right at the wrong time with the proberty slump. I think our best option now is to move back until that is sold, and rent out the second property until the 1st one is sold.:o

Well based on post #5 I think you are still ok for several years, but you might want to get a tax accountant to check for sure. The only thing you might need to consider doing in the short term is make a declaration to the Taxman that your current house has been your main residence since you moved. It should be self evident anyway, but the declaration avoids any doubt and needs to be done within two years of you buying the second property.

silvercar

Not sure I understand your post, but you are exempt from CGT on your main residence and on the last three years of ownership of a property that was your main residence at any time.

So if you owned for 15 years and it was your main residence for the first 13 you will be exempt from CGT completely provided you sell within 3 years of it not being your main home. Even if you waited a bit longer you have a CGT allowance (£10,200) and letting relief (upto £40,000).