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Can I avoid Capital Gains tax by selling a second property?
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Ginger_Winner
Posts: 118 Forumite
I'm just about to buy a second property with a view to doing it up and selling for a profit. I have been told that if I do this I'll be subject to capital gains tax. Is there any way that I can avoid this....?
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Comments
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yes, you live in it as your primary residence I believe:beer: Well aint funny how its the little things in life that mean the most? Not where you live, the car you drive or the price tag on your clothes.
Theres no dollar sign on piece of mind
This Ive come to know...
So if you agree have a drink with me, raise your glasses for a toast :beer:0 -
If you do not want to move into it and have it as you main home, you can use your allowance of £8,800 and if you are married you can double that because you can use your other half's as well. After that any gain will be subject to 40% tax.
If you buy a second home you have three years in which to decide if you want to sell the original home and move into the second one. If you do not intend to stay put you can buy the house do it up move into it, sell the old place then sell the one you have just done up and not pay any tax. But you cannot do it often or else they will say you are running a business.0 -
If you've lived in it a while you can get taper relief.My TV is broken!
Edit: refunded £515 for TV 1.5 years out of warranty - thank you Sale of Goods Act! :j0 -
Some people have told me about a rule whereby if you live in it for a year and a day you don't pay tax when you sell. But I've never actually seen that written down anywhere and the chap who told me about it has several properties in Ireland, so it could be different rules over there.
Basically it was an Irish bloke in the pub who told me!! Could be rubbish.0 -
You get taper relief anyway if you have owned it for long enough.frivolous_fay wrote:If you've lived in it a while you can get taper relief.
Rewind :
You already own one property which, until you buy this second one, was your Principle Private Residence (PPR). You do not pay CGT on disposal of your PPR. If you want to claim the new one as your PPR you had better live in it for 9 months +. If you still want to keep you original house as your PPR, you pay tax on the profit you make when you sell the second house. You can deduct the costs of buying, selling and renovation, plus taper relief if you have owned it for long enough. Then deduct your CGT allowance for the year, currently about £8800. The profit made is added to your income for that tax year (not taxed at 40% automatically). If you have a wife you can trust (I sound like The Shawshank Redemption), you can gift her a proportion of the house before you sell it. She is then able to claim her £8800 CGT exemption against the gain as well.A house isn't a home without a cat.
Those are my principles. If you don't like them, I have others.
I have writer's block - I can't begin to tell you about it.
You told me again you preferred handsome men but for me you would make an exception.
It's a recession when your neighbour loses his job; it's a depression when you lose yours.0 -
Worse than capital gains tax
If you purchase a property with the intention of doing it up and selling it for a profit, you are TRADING, you need to register with HM Revenue & Customs as a new business start up and you will be liable to income tax and national insurance on the profits - you won't be eligible for CGT annual exemptions nor CGT taper relief.
That is why most people do up a property and then either live in it or rent it out - that way you revert back to it being an investment and subject to capital gains tax.
HMRC are getting hotter on watching for this kind of thing as they've finally realised that they're losing too much money by people claiming CGT exemptions when they are actually trading rather than investing.0 -
you can have up to four people on the deeds.(hint!)0
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If it is I'd be shooting my accountant....:eek:WHA wrote:Worse than capital gains tax....
I can see that the revenue might be catching up on this, what with all the "property !!!!!!" on TV, but surely if you were trading it opens up all sort of additional expenses that can be claimed which could not be offset against CGT?A house isn't a home without a cat.
Those are my principles. If you don't like them, I have others.
I have writer's block - I can't begin to tell you about it.
You told me again you preferred handsome men but for me you would make an exception.
It's a recession when your neighbour loses his job; it's a depression when you lose yours.0 -
BobProperty wrote:If it is I'd be shooting my accountant....:eek:
I can see that the revenue might be catching up on this, what with all the "property !!!!!!" on TV, but surely if you were trading it opens up all sort of additional expenses that can be claimed which could not be offset against CGT?
Quite correct - there are far more expenses potentially allowable, but usually that will come no-where near to losing the CGT reliefs.
Some of the HMRC manuals dealing with what is a "trade" are as follows - you will see that it would be wise to have proof that your intention from the outset was not to sell for a short term profit - if HMRC can put a case that your sole objective was profit then they'll have you for trading rather than investment. Hence, why on the property programs, most of those shown either live in the "done up" house themselves or decide to rent it.
http://www.hmrc.gov.uk/manuals/bimmanual/BIM20205.htm
http://www.hmrc.gov.uk/manuals/bimmanual/BIM20080.htm
http://www.hmrc.gov.uk/manuals/bimmanual/BIM20210.htm
http://www.hmrc.gov.uk/manuals/bimmanual/BIM20230.htm0 -
WHA, would using a Limited Company be any use in some circumstances?A house isn't a home without a cat.
Those are my principles. If you don't like them, I have others.
I have writer's block - I can't begin to tell you about it.
You told me again you preferred handsome men but for me you would make an exception.
It's a recession when your neighbour loses his job; it's a depression when you lose yours.0
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