Hopefully simple CGT query

VT82

In the following scenario, would there be a capital gains tax liability?

Currently owning two properties:
House owned with parent, small mortgage left. Joint names on ownership and mortgage.
Flat owned in own name, bought as a reposession 4 years ago for £121k. Treated as primary residence for electoral roll, council tax etc since then.

Want to buy a house with partner. Have enough savings to get the deposit together without selling a property, and therefore want to claim when viewing/offering that we're not in a chain. But would still want to sell the flat, as would not want to be a landlord, and don't think the figures would stack up.

If we bought the new house without selling the flat, would therefore own three properties at the same time. If the flat was sold for £145k, would there be a CGT liability if this was done after buying the new place?

Thanks in advance you geniuses you.

00ec25

I assume you have not notified ("made a CGT election") HMRC which of the flat or parent house is your main home?

|If you have not then which of the 2 is your main home is "a matter of fact" over which you will need more than electoral roll and CT to prove you lived in the flat as your main residence. Although they are factors, if HMRC choose to they will want you to pass such tests as: where do you commute from, where is your social life centred, where do friends find you . I don't doubt you'll pass but you need to be aware that is how it works

On that basis you establish it was you main residennce for the last 4 years, that will give you another 3 years in which to sell it once you move out , and remain free of CGT as your entire ownership p[eriod of 7 years is classed as exempt

It was a very good buy if you reckon the flat has increased by nearly 20% in 4 years

Kynthia

Only one property at a time is your primary residence and exempt from CGT for the time you lived in it and the last 3 years of ownership. If you own more than one property you have a set period of time to declare which property it is before it then becomes based on fact and evidence.

VT82

Thanks both that's really helpful.

Almost makes it sound like it's worth looking into flipping houses like an MP to work out which would be better elected as the primary residence!

And yes it was a good buy - reposession and all. £145k would be a big drop from what some are asking in the same block. Had no problem getting it electronically valued at something like £160k for remortgaging to HSBC at 60% LTV

00ec25

VT82 wrote: »

Almost makes it sound like it's worth looking into flipping houses like an MP to work out which would be better elected as the primary residence!

you are too late - you had to make an election within 2 years of owning 2 properties. The only way around that is to buy a 3rd or sell of one and buy another, in both the latter case the 2 year clock then starts ticking again.

Bear in mind also you cannot nominate a tenanted property , it has to be available to you for use as a home to be classed as a residence that you can nominate

remember also that when you inherit the remainder of your parents house then you are certainly liable for CGT on the bit you already own when you sell off the parents property - there is no way around that

VT82

Hello again.

OK, so I never did buy a new house or sell the flat, however I've now paid off the mortgage on the house owned with my mum. I'm now looking at buying a property again, and CGT issues have reared their ugly head.

Here's the details:

- I own a house outright with my mum. Owned for 15 years, and the sale value now would be £50k more than we paid for it.
- I own and live in a flat with a mortgage. I've had it for 5 years, and the sale value now would be about £40k more than I paid for it.
- I am looking at buying a new house and selling the flat.
- I would also like to sell my mum's house and buy her a nicer one.

Would any CGT liability arise in any of the following scenarios?

(1) Sell the flat and buy a new house simulataneously (i.e. just selling a house that was my main residence).
(2) Buy a new house, do it up, and sell the flat once I can move into the new house (i.e. own three houses at one time, then selling one, although it was my main residence).
(3) Do either of the above, and then sell my mum's house and buy her a new one simultaneously (i.e. selling a house I've got a part share in but isn't my main residence).
(4) Doing either of the above, and then buying my mum a new house and renting out her old one (would there be CGT on selling it eventually? I guess so).

I hope any of that makes sense. Lots of variables to think about for me! I thought stamp duty was a nasty issue, but at least you know where you stand with that without seeing a tax adviser! Thanks in advance for any advice you can give.

Mattygroves2

VT82 wrote: »

Hello again.

Would any CGT liability arise in any of the following scenarios?

(1) Sell the flat and buy a new house simulataneously (i.e. just selling a house that was my main residence).
(2) Buy a new house, do it up, and sell the flat once I can move into the new house (i.e. own three houses at one time, then selling one, although it was my main residence).
(3) Do either of the above, and then sell my mum's house and buy her a new one simultaneously (i.e. selling a house I've got a part share in but isn't my main residence).
(4) Doing either of the above, and then buying my mum a new house and renting out her old one (would there be CGT on selling it eventually? I guess so).

I hope any of that makes sense. Lots of variables to think about for me! I thought stamp duty was a nasty issue, but at least you know where you stand with that without seeing a tax adviser! Thanks in advance for any advice you can give.

Assuming you are actually living in the flat then the only property you've got a potential CGT liability on is the one you own with your mum. So taking your scenarios:

1. No CGT liability
2, So long as you sell the flat within 18 months of buying the new property there will be no CGT liability. After that CGT starts to kick in but it will be pro rata for months owned.
3. Yes - you will be due to pay CGT on your share of the profit. You'll have your annual allowance to set against it though.
4. No CGT when you rent out but you will have to pay it eventually when you sell.

Yorkie1

Kynthia wrote: »

Only one property at a time is your primary residence and exempt from CGT for the time you lived in it and the last 3 years of ownership. If you own more than one property you have a set period of time to declare which property it is before it then becomes based on fact and evidence.

I believe this has recently decreased to 18 months.