Avoiding capital gains tax on second property.

Helen36

My husband and I currently live in our family home, which we've owned for nearly four years, and rent out a tiny flat. I've owned my flat for ten years, and it's now in joint names and mortgaged.

We think it's time to move away from the expensive South East (and our grotty neighbours!) so are thinking of selling our family home, then moving back into our flat for a while so that when we move right away, we can sell that without paying capital gains as this would be a massive hit on our very stretched finances.

If we did this, would this mean that we don't have to pay capital gains? And does anyone know how long we would have to live in the flat for for it to become our principal residence again?

Thanks,

Helen

Mallotum_X

So you have a second property, have made capital gains, yet think somehow you shouldn't pay tax on that gain.

Sounds like a great plan, let the rest of us pay your way for you.

Legally, you cant do what you are proposing, but you could probably get away with fraud if you wanted to risk it.

kk20

Not true. It is called flipping and is perfectly legal providing done properly. The key factor is the 4 years you have been in your current house - this is outside the permitted selling window so you cannot flip.

Helen36

Mallotum_X wrote: »

So you have a second property, have made capital gains, yet think somehow you shouldn't pay tax on that gain.

Sounds like a great plan, let the rest of us pay your way for you.

Legally, you cant do what you are proposing, but you could probably get away with fraud if you wanted to risk it.

Thanks for the lovely advice! We are expecting a baby, and even though we already have two children, we have both continued to work, paying into the system (and claiming no benefits) and busting a gut to pay our combined mortgages, with the result that we have no disposable income and life is very difficult.

We thought that it would be the sensible option to downsize for a while, even though we'll be bouncing off the walls in there. This would give our family a bit of breathing space from crippling mortgages, a better chance for the future, and an opportunity to think about where we can be that will allow us to live again, without worrying about every penny. How silly of us.

Wee_Willy_Harris

Helen36 wrote: »

(and claiming no benefits)

Everybody claims benefits. Those with children will claim the most.

kk20

Assuming mortality issues aside, a family of 4 will pay far more into the system over their lifetime than a family of two. Me and my wife have worked all our lives, my eldest child is working and my youngest is at uni. We claimed tax credit and family allowance I think over 18 years the family allowance is probably circa 15k in total (per child) - tax paid back in 3 years? Tax credits maybe another 5k so 4 years of tax (in total) per child. Your point being what exactly?

Just because you do not either understand tax breaks and rules (or fail to utilise them) do not chastise others for wishing to learn about them.

brit1234

So a landlord doesn't want to pay capital gains tax now. Yet buy to let investors are pricing out first time buyers and getting unfair tax advantages on top whilst charging sky high rents despite being bailed out by extra low interest rates.

As a priced out first time buyer I believe you should pay 40% CGT as the original proposals rather than the smaller 28%.
:mad:

Helen36

Wee_Willy_Harris wrote: »

Everybody claims benefits. Those with children will claim the most.

I take your point. We automatically get child benefit, but our companies don't do childcare vouchers, and we don't claim anything like working tax credit or child tax credit. Neither of us have ever been unemployed, we've been working since we finished our training (and during it). We're both in our late 30s, so I do feel that we've put a lot into the system!

But this is beside the point. I just didn't want people to think that I'm claiming anything in addition to what the government automatically gives us.

kk20

brit1234 wrote: »

As a priced out first time buyer I believe you should pay 40% CGT as the original proposals rather than the smaller 28%.
:mad:

why? so prices go UP to compensate the extra tax? Or perhaps rent will increase so the majority wont save as much for their first house?

40% will simply mean the rich buy property and dont sell. The poorer will simply not bother BTL strangling the lower end of the market. I fail to see how this will help. You do realise that BTL pay taxes on their profits dont you?

Wee_Willy_Harris

Helen36 wrote: »

I take your point. We automatically get child benefit, but our companies don't do childcare vouchers, and we don't claim anything like working tax credit or child tax credit. Neither of us have ever been unemployed, we've been working since we finished our training (and during it). We're both in our late 30s, so I do feel that we've put a lot into the system!

But this is beside the point. I just didn't want people to think that I'm claiming anything in addition to what the government automatically gives us.

I wasn't suggesting that you didn't pay your fare share, or even more than your fare share. But you do get benefits as well. And not just the cash benefits mentioned....

Free education for your children
Free healthcare
Free police service
Free fire service
A welfare systems to protect you if times get hard
A state pension
Legislation to protect you as a consumer
Legislation to protect you as an employee
etc etc etc.

I think the objections raised will be based on your use of words like "avoid" and "tax" as it may seem that you now want to pay LESS than your fare share, which means that the rest of us will have to make up the difference for you.

Helen36

brit1234 wrote: »

So a landlord doesn't want to pay capital gains tax now. Yet buy to let investors are pricing out first time buyers and getting unfair tax advantages on top whilst charging sky high rents despite being bailed out by extra low interest rates.

As a priced out first time buyer I believe you should pay 40% CGT as the original proposals rather than the smaller 28%.
:mad:

Wow! I wish I'd never asked! For your information, I lived in my flat for years before I met my husband. I'm now renting out my flat to a single mum, who doesn't work at all. I know many private landlords won't touch people who live off benefits, but she seemed like a lovely girl and I thought she and her children should have the chance of a nice home. And despite things being tough for us, I haven't put her rent up since she moved in five years ago, because I know things are probably equally hard for her.

But yes, I'm probably evil through and through for working extremely hard all my working life and using my money wisely and hoping to get a return for it.

And on that happy note, I'll leave this debate. Thanks for your advice.