capital gains on family home

Wig

Family home owned 40 years.

Now want to buy a new home.

Will buy new home without mortgage and without selling first home.

First home to be occupied by family members for about a year before selling it.

If the owner of the first home moves into the new property, how long have they got to sell the first home before Capital Gains is payable on it?

Should they remain registered at the first home until it is sold in order to avoid CGT?

Spidernick

18 months. If the owner moves into the new home from day one then this should be the de facto 'Principle Private Residence' (PPR) but you might want to put in an election as such to HMRC to avoid the possibility of a chargeable gain on the second property, if sold in the future (assuming it remains as PPR throughout ownership).

Even if the new home is held for a little longer than the 18 months, there is unlikely to be any Capital Gains Tax (CGT) to pay due to the CGT exemption.

CLAPTON

Wig wrote: »

Family home owned 40 years.

Now want to buy a new home.

Will buy new home without mortgage and without selling first home.

First home to be occupied by family members for about a year before selling it.

If the owner of the first home moves into the new property, how long have they got to sell the first home before Capital Gains is payable on it?

Should they remain registered at the first home until it is sold in order to avoid CGT?

as alrady said 18 months and definitely no cgt

longer than that, it will depend upon the value of the property when sold, its purchase price and how long it has been owned and if jointly or otherwise

Wig

CLAPTON wrote: »

longer than that, it will depend upon the value of the property when sold, its purchase price and how long it has been owned and if jointly or otherwise

Can someone expand on this please...?


Another question.

Those family members (in post no.1) currently own their own house nearby (the small home), which needs modernising and then will possibly be used as a rental property and they might be buying the family home from post no.1

The small home has been the PPR to that person for 20 years and has a value of 100,000 bought for 36,000.

We would like to minimise any future capital gain on the small home, by somehow taking the capital gain exemption at this point (current increase in value 64,000). ........... Unless this is easily done by some mechanism I don't know about, I have come up with the idea of selling the small home to our own property management company (a company we will have to set up). Then the home has been sold with no CGT, and the home belongs to the company and the new CGT assessment when it is finally sold (by the company) will start from the current value £100,000.

If we do nothing and simply buy the family home and move out of the small home and then rent out the small home for many years when it comes to sell it we will have lost the capital gains exemption on the £64,000 would we not?

booksurr

rather than running off on flights of fancy about setting up property companies you need to learn the basics of private residence relief and letting relief first
https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet

first home retained by original owners
- sell within 18 months = no CGT
- sell after 18 months CGT liablity = gain - exemption period of time lived in + 18 months / total time owned. As the property has been owned for 40 years the rule is the gain starts from its value in March 1982, so if sold in March 2017 that would be 432 months ownership. Suppose you move out in March 2015 that is 24 months before sale meaning your exempt period is March 82 - March 15 = 408+18= 426 months leaving 6 months liability

Suppose the gain from 1982 - 2017 was £1million the CGT liability would be: £1m - exemption (£1m x 426/432) - personal allowance (currently 11,000) = £2,889 taxable gain , tax payable (worst case all at 28%) is £809 yes eight hundred and 9 pounds on a house you sold for > £1million

first home retained by original owners and let after they move out
- exempt for the period lived in + 18 months
- gets letting relief of up to £40,000

you do the maths and do the basics before you start running ....

zygurat789

Wig wrote: »

Can someone expand on this please...?

the gain on the house, if it fell within the scope of CGT would be the sale proceeds less the cost and then pro-rata for the period within the scope which would be small after 20 years.
The owners of the house each have an annual exempt amount, currently £11,000 so no tax on a taxable gain of up to £22k.