Selling 2nd home and Tax

gbmacqueen

Does anyone know:

I have married and now have 2 homes. I am fixing up my house to sell and would like to know if i pay capital gains tax for that. My house is payed off 100% and me and my wife have remortgaged to home we now share.

So does anyone know?
My real aim is to sell both houses and buy a better one.

thanks
Gavin

Dumbledore55

I believe if you've lived in it previously than you don't pay Capital Gains for the first 3 years

Mrs_pbradley936

Dumbledore is right. You have three years in which to sell before you are liable to Capital Gains Tax. The following paragraph is taken from HM Revenue & Customs Site:-

What if I sell my home?
No chargeable gain arises when you dispose of your home if all the following conditions are met.

You bought it, and made any expenditure on it, primarily for use as your home rather than with a view to making a profit.
Throughout the period that you owned it, it was your only home.
You did actually use it as your home all the time that you owned it.
Throughout the period that you owned it, you did not use it for any purpose other than as a home for yourself, your family and no more than one lodger.
The house and garden do not exceed half a hectare (about one and a quarter acres).
Even if not all these conditions are met, you may still be entitled to relief. For example

if you had more than one home, you may be able to nominate one of them as your main home for the purposes of the relief
if all the conditions were met throughout all but the last three years of the period that you owned your home, you will still be entitled to the full relief

Mrs_pbradley936

Basically if you own more than one property for three years you cannot call them both "home". Make sure you sell within three years.

Fitzy29

Agree with the above!

gbmacqueen

Unfortunately I have been doing the house I want to sell for more than 3 yrs as I don’t have much time to spend working on it.

The house I live in belonged to my mother before she died and the mortgage (endowment but with cancelled policy) was paid by the executors until I re-mortgaged earlier this year. The deeds changed to my name over 3 years ago.

Both houses are low value £60,000 each and need maximum value to get anything worth having. How can I reduce capital gains tax as money is tight?

So hows that for complicated.

gbmacqueen

the executors were paying the mortgage but the mortgage was not reducing because it was interest only.

Just wanted the make that clear

gbmacqueen

Thanks for the help so far.

Mrs_pbradley936

Well you and your wife both have an allowance of £8000 (I think is latest figure) each per annum. This means you can have £16,000 gain before the tax kicks in. If you are selling at the cheaper end that should not hurt you too badly. Sell one this year and one next year or else you will have to use your allowance on both properties.

Mrs_pbradley936

Just took these of the HM Revenue and Customs site. As you can see the allowance is £8,800 which is even better for you.

Annual exempt amount 2004-05 (£) 2005-06 (£) 2006-07 (£)
Individuals etc* 8 200 8 500 8 800

Mrs_pbradley936

Hello again,

One more thing, the tax year runs from one April to the next (not January til December) so you can sell one house before April and the other one after April and still be OK.