CGT and Temporary second property 30 September 2009 at 7:15PM in House Buying, Renting & Selling 4 replies 650 views

sisterk

Hi all,

I'm after some advice on capital gains tax and a second property

Let me explain the scenario:

My brother and I were left 200k inheritance in a joint account to use how we please.

I've spent my half on buying a flat, and he's leaving his in the account while he goes travelling.

I want to move to a house, and I've put in an offer subject to sale of the flat.

Here's the tricky bit. What I'd like to do, is use the 100k in the bank instead of the 100k I would get from the flat sale to go towards the house and secure it before someone else snaps it up. Then, when the flat eventually sells, the 100k can go back in the bank to replace the money I "borrowed" from myself.

The only problem I can see, is that because I'll have two properties, the eventual sale of the flat will incur a big loss due to capital gains tax.

Does anyone know if there's any way I can make use of the money just sitting in the bank without incuring any financial "penalties" in the process?

Thanks

silvercar

You are exempt from CGT for the time a property was your main residence and the last three years of ownership.

sisterk

Thanks - so just to clarify I understand you - do you mean that as long as I've owned and lived in the flat for more than 3 years (which I have) I won't have to pay CGT when selling it as a second property?

Or that I'd need to be living in the house 3 years longer than the sale date of the flat to escape any CGT on a future sale of the house?

new_home_owner_3

it means as long as you sell it within three years of you moving out you wont have to pay CGT.

After three years you have to pay a percentage.

Fire_Fox

Are you saying you want to use your brother's half of the inheritance to buy a house in your name?? That isn't borrowing from yourself it could be deemed as theft from your brother. The only way you could do this is to have the written permission of your brother that the money is a loan, in which case the bank won't lend on a mortgage as you don't have a no-strings deposit to put down on the house.