Second home - Capital gains tax

Seanymph

and yes - the french property is jointly owned (it's the only one that is.)

kidmugsy

CLAPTON wrote: »

... they get reliefs


- period of actual let,
- or PPR
-or 40,000

plus of course 10,900 cgt relief

http://www.hmrc.gov.uk/cgt/property/sell-own-home.htm

It sounds to me as if there might be a potentially large long-term benefit from letting the property to the boy, albeit for a peppercorn rent. Or are HMRC wise to that trick?

Another thought: do the mortgage providers know that your husband isn't living in the property? Is the insurance valid in these circs?

Seanymph

The mortgage company do know - but it doesn't need to be buy to let - we had trouble with mortgaging it because of that Natwest had the vehicle for us, but we coudln't find it elsewhere.

We have insurance through saga who do it specifically for family occupied housing you don't live in.

Thanks for the thoughts - we have done it all properly, but assumed it is saving us tax long term, as we aren't 'renting it out' - just never thought to check.

jamesd

You should learn about letting relief, available only to let properties, which can substantially reduce or completely eliminate CGT liability in let properties. Eliminating £40,000 of CGT gain is worth doing but it does require actual letting at some point. The link provided by Clapton also mentioned this important relief.

You should probably arrange for some form letting at some point.

You may also just choose to use a mortgage secured on your own home to replace that on the second property. In general, its' possible to deduct mortgage interest from rental income when working out tax liabilities and it seems fair that you at least charge the occupiers your out of pocket interest cost. There are some catches to watch out for when arranging financing so it's best to get an accountant to consider it to be sure it'll be a way that HMRC will accept. The property the mortgage is secured on makes no difference to this - can be your own home or any let property - it's just necessary to ensure it's clear that it's for the business purpose of the letting business.

You might then freely choose at some later date to contribute a gifted mortgage deposit to them. Your husband would have benefited from an income tax gain and might choose to give them that gain. Or even all of the rent paid if feeling generous. Just be sure you don't make any formal agreements to do this because that would cause it to look like a tax dodge rather than just later choosing to pass on the benefit.

Seanymph

thank you James - we can't raise the mortgage on my house because I don't earn enough. So he had to raise the mortgage to but our holiday home on his.