capital gains tax

nat38

I posted this in the buying/selling section, but this may be a better place

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We are thinking of buying a second property where my husband would live 3-4 days a week during 1-2 years.
Our main residence ie, where we live now, is in Newcastle and it's solely on my name. The second property would be in Edinburgh. If this one was in both names, and we had to sell it afterwards, would we have to pay CGT? What if it was in his name only?

Thanks!

pjcox2005

You can only have one principal private residence as a married couple so the second home would be subject to capital gains tax.

Couple of points to consider:

1) You both can use an annual capital gains allowance which currently stands at £10,600 per person against any gain on the year of disposal. Assuming no other gains that year then you would be unlikely to have a £20k gain over a 2 year period unless you hold it for a longer term.

2) Buing in separate names won't make a difference due to the point above being that you can only have one PPR per married couple.

3) Potentially there may be some planning around which house you elect to have PPR to mitigate any gain.

4) If you are only planning on having it for 1-2 years then would it be more economical to rent once you take into account buying/selling fees and stamp duty?

nat38

thanks pjcox!

pjcox2005 wrote: »

You can only have one principal private residence as a married couple so the second home would be subject to capital gains tax.

and we have to have a joint one, ie we could not have one each separate?

pjcox2005 wrote: »

Couple of points to consider:

1) You both can use an annual capital gains allowance which currently stands at £10,600 per person against any gain on the year of disposal. Assuming no other gains that year then you would be unlikely to have a £20k gain over a 2 year period unless you hold it for a longer term.

I see. So in that case the property should be in both names? And it would not matter that it was my second property?

Also, just to clarify: the 10,600 gains per person includes savings, ie ISAs etc? (apologies if this is a really daft question!)

pjcox2005 wrote: »

2) Buing in separate names won't make a difference due to the point above being that you can only have one PPR per married couple.

3) Potentially there may be some planning around which house you elect to have PPR to mitigate any gain.

someone else mentioned this - what would be the advantage? oh I see, based on the gain made by each property for example?

pjcox2005 wrote: »

4) If you are only planning on having it for 1-2 years then would it be more economical to rent once you take into account buying/selling fees and stamp duty?

We would not be paying stamp duty (100k), but anyway, yes, in fact that's what we were first thinking, but the guys in the buy/sell forum made me think it might not be a good idea.

Also, if we rented it - how much would be the rental income tax?

many thanks for your help!

CLAPTON

married couples can only have one PPR at a time; it doesn't matter if the properties are own separately or jointly or one has one and the other has the other.



if the property is in joint names then the capital 'gain' would be halved; each person can offset their 10,600 allowance against their share of the profit
(the gain is the difference between the selling price and the buying price less allowable costs ) do you really think you will be making more that 21K in profit in just a year or so on an 100k property?


savings have nothing to do with capital gains although savings interest is liable for income tax; ISA are by definition tax free


if you have two properties that you live in (i.e. not rent out) then you can elect which you wish to be considered your PPR (you must do this within two years of acquisition and you can change your election whenever you like) this can be used to mitigate cgt (remember those MPs?... all legal of course)


if you rent out the property then you pay income tax via self asssesment of the profit i.e. rental income less costs (mortgage interest, maintenance, gaas safety checks, advertising, agency costs etc)

nat38

many thanks clapton!

CLAPTON wrote: »

married couples can only have one PPR at a time; it doesn't matter if the properties are own separately or jointly or one has one and the other has the other.

i asked this in another thread but I'll ask you you too - just out of curiosity, how do they actually knowif someone is married or not??

CLAPTON wrote: »

if the property is in joint names then the capital 'gain' would be halved; each person can offset their 10,600 allowance against their share of the profit
(the gain is the difference between the selling price and the buying price less allowable costs ) do you really think you will be making more that 21K in profit in just a year or so on an 100k property?

i wish!! :rotfl:
no, i was just totally confused about it...
clear now!

CLAPTON wrote: »

savings have nothing to do with capital gains although savings interest is liable for income tax; ISA are by definition tax free

again, i got confused between the 10,600 allowance and the 10,200 tax free ISA.......

CLAPTON wrote: »

if you have two properties that you live in (i.e. not rent out) then you can elect which you wish to be considered your PPR (you must do this within two years of acquisition and you can change your election whenever you like) this can be used to mitigate cgt (remember those MPs?... all legal of course)


if you rent out the property then you pay income tax via self asssesment of the profit i.e. rental income less costs (mortgage interest, maintenance, gaas safety checks, advertising, agency costs etc)

much clearer now - many thanks for your help!

CLAPTON

in general the UK tax system is based on the assumption that people are honest; but there are penalties for fraud

nat38

clapton wrote: »

in general the uk tax system is based on the assumption that people are honest; but there are penalties for fraud

:T

yep, very diff to where i come from...