Capital Gains Tax on 2nd Property?

lippylonglegs

Hi all,

I’d be very grateful for some advice on how best to manage the Capital Gains Tax that I might be liable for, in the event I sell the flat I own. I have read various bits & pieces relating to this, but am getting very confused.

Some back ground info:

I bought the flat in November 2006 for £190,000.

The flat was my own personal residence, and the only property owned by me until 2011. In January 2011, my husband and I (recently married) purchased our new home which is now our residence. My previous flat has been rented out since March 2011.

Last year my flat was valued at between £250K-£275K and I remortgaged and now have a £212K mortgage on it.

I’m thinking of selling my flat and am expecting to get £250K but have a few questions relating to the best way of managing this and when:

1. Do I have 2 or 3 years of CGT relief ?

2. What and where do i need to register which one as being my main residence if I need to do that? Or is that only if we are still living in both?

3. If I sold the flat in September of 2013, what would I pay in CGT (after renting for 2 years and 6 months)? or If I sold the flat in the summer of 2013 (having rented it out for 3 years and 6 months? This is obviously dependant on whether you have a period of grace of 2 or 3 years.

4. If I was to gift half of the flat to my husband and pay the Stamp Duty Land Tax would that benefit us? And what would the SDLT be?

5. Would that entitle us to double the CGT relief of £21,200K?

6. I read also about section 223 of the CGT Act and there was a letting exemption that would allow for a £40K exemption relief - is this valid for me? And if that is the case, I therfore have nothing to worry about as If I sold for £250 I wouldn’t be making £40K profit anyway... right?

Does anyone know anything about this?

Huge thanks in advance
Annie

pjclar02

Hello Annie

In response to your specific queries:

1) The flat will be covered by principal private residence relief (PPR) for the whole period of ownership. You are allowed to claim the actual period upi live there as your main residence plus the last three years of ownership, so you could potentially hold it until 2014 (and beyond) without paying CGT

2) No need to elect, as covered under PPR rues as above.

3) The answer to both of these is that there is no CGT. However do you mean summer 2014 in your second example? In this case, the amount of six months or so that is not covered by PPR relief will be covered by lettings relief so there will still be no CGT to pay.

4) There would be no CGT or SDLT on the gift, as there is no consideration. However, you will be worse off for CGT purposes by doing this on the ultimate sale, as the property will never have been your husband's PPR.

5) Yes.

6) See 3 above - yes lettings relief will apply so you should get a minimum of £40k additional exemption based on your circumstances.

Hope this helps.

lippylonglegs

Thank you so very much that's really useful.
Annie

ceeforcat

In addition to that extemely comprehensive answer from pjclar02 I will attach a link which may further put you off gifting half of the property when you have already made a decision to sell.

http://www.taxexpert.co.uk/property_tax/cgt_property.php