Capital Gains tax on Property

ian2712

I am, hopefully going to buy a second home as a getaway for weekends and holidays. It is only 70 miles from my main residence. If, in future, say 10 years time I sell this property I will have to pay Capital Gains Tax. I know there is an annual allowance, and any improvements can be offset. However, is there any mechanism I can use, or set up at this stage which will reduce a CGT bill?

david29dpo

none as i know of, no. dont think you can even claim relief on the mortgage if its not let out.

PoorDave

You will only have pay CGT if the price rises over those ten years - if there's no gain, there's no CGT.

Up to you to decide whether you think price will have risen by more than your annual allowance (currently £8800, but this will most likely have gone up a bit too). Would help to have it owned in joint names, then you can use more than one person's allowance when you sell.

Is it likely to show a gain of more than £8800 or £17600, do you think?

silvercar

if you don't intend renting it out and so you will have two homes, you can elect which one is your PPR (and so attracts capital gains tax relief). It can be advantageous to change which one is your PPR as you get CGT relief for the time it was your PPR and the last 3 years of ownership. Swapping at the right time can save you money. There are rules about declaring your PPR and changing it so you need to investigate this further.

Ian_W

Alternatively, assuming that as you're using it as a holiday home it's in a desirable location consider setting it up as a Furnished holiday let. These have very significant tax advantages over BTLs or second homes both in terms of income and capital gains tax.
If you make a loss this can be offset against earned or self-employed income and you qualify for business asset taper relief when you come to sell.
To qualify you must offer the property for letting for 140 days pa and it must be actually let for 70 days - so still plenty of opportunity for you to use it.
See:
https://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4017930
and
https://www.hmrc.gov.uk/leaflets/cgt1.htm#f2