CGT and two homes

toothwiz

Am very confused about whether I should sell up my second home. Any advice would be very welcome.
I bought my property A with my partner in 2003 for 249k and lived there till 2008.Then I moved to property B 470k with my partner and rented out property A. I rented out property A till we had it empty for 3 months this year and then another tenant moved in.
We havent made a PPR election yet. We are thinking of selling especially with the new changes coming. I presume I am still exempt from CGT as three years hasnt elapsed since moving but I am not sure please advise. Property a is now 325k and property b is still 470k. Please advise

DavidLaGuardia

Correct about the last 3 years for a house you have lived in, but other than that, the proportion of time when it was not your main residence is the proportion of any gain that wll be taxed.
So, for example if you left in 2008 and held it up until 2012 having owned it from 2003 you will have owned it 9 years
5 years when you actually lived there plus the last three are exempt i.e. 8/9 x the gain
If the house price is still £325k and you've made £76k
the taxable amount is £76k x 1/9 = £8,666 which is below the allowance (unless they reduce that of course!).

You may wish to think about this carefully though rather than letting the tax planning be the proiverbial "tail that wags the investment dog". If the property is a sound investment that will rise over time and give an income, it may be less wise trying to avoid the tax by selling early. This may be different if a very large gain was made in the period of ownership so far, but just over 30% in seven years is a steady rather than huge rise by historical standards.

00ec25

toothwiz wrote: »

I bought my property A with my partner in 2003 for 249k and lived there till 2008.

As you appear to jointly own it (50/50?), then the gain will be split between each of you, and you each have a personal allowance to offset against your share of the gain. In additon, because it is now rented out, and was previously your main home, you each have a letting allowance - this means it will be a very long time before you would pay CGT (under the current rules!) - see example calculation here
(BTW - any time based calculations must be done in months not whole years)
Alternatively, and as said, if you sell within 36 months of moving out (so month xxx in 2011) then it will be exempt from CGT under the 36 month rule.

toothwiz wrote: »

We havent made a PPR election yet.

it is too late to do a PPR election - you cannot elect a house which is being rented out to be your "main" residence when patently you no longer have any access to live in it because it is tenanted - the election applies to second homes you may still use, not rented out ex homes. You are now the owner of one home and one rental property - not 2 "homes"!

moonrakerz

You could ask your MP, he will undoubtedly know all the [STRIKE]scams and fiddles[/STRIKE] correct procedures to ensure that you pay all the tax that is due :D

DavidLaGuardia

00ec25 wrote: »

Alternatively, and as said, if you sell within 36 months of moving out (so month xxx in 2011) then it will be exempt from CGT under the 36 month rule.

I know it applies in this case, by to avoid any confusion, the date moved out is irrelevant to the 36 month rule.
It applies to the last 36 months of ownershiop of the property IF it was ever your main residence.

toothwiz

thanks for your advice david it looks like the best advice would be to sell . its just as well I still have a year to do it in.