Will I get charged a Capital Gains Tax....

thenap80

Hi

I have bought a house and fortunate enought to have paid it off in the ten years since I bought it. It has increased in value by about 100k in those years.

I am looking to buy a second place - just a small place, perhaps for 120k. I will then have two properties and this is where I am told Capital Gains Tax comes into play....

If I then sell my first home will I have to pay capital gains tax ( I am told trhis is 40%!!!) on the 100k profit that I made even before buying my second home??

Thankyou

big_trev

Not if you lived there all or most of the time. Google PPR relief.

kinger101

Do some reading then ask questions which are not based on what some bloke in the pub who knows nothing about capital gains tax told you. The CGT rate hasn't been 40% in a long time.

https://www.gov.uk/browse/tax/capital-gains

thenap80

Read it. Confusing.

kinger101

In 12 minutes? Meet us half way. There's not much point in us retyping stuff adequately explained elsewhere.

Cornucopia

This is more specific...

https://www.gov.uk/tax-relief-selling-home

thenap80

Ah so I would get some relief from having lived there for ten years. How much is said to be complex but am sure its done kind of on a pro rata basis! Thanks!

konark

Janet and John.
You will not have to pay CGT on any profit you make on your original home because this is your principal residence.

If you continue to have 2 houses you will be charged CGT on any profits you make ( over your yearly c£10,000 allowance) on the 2nd house because it is not your principal residence.

Cgt is 28% or 18% if you don't earn much.

agrinnall

If you are liable for CGT then you won't be charged it, instead it is your responsibility to declare it to HMRC and pay according to the appropriate schedule. If you don't declare it and HMRC realise that you should have you'll then be hit with additional penalties and probably interest.

thenap80

konark wrote: »

Janet and John.
You will not have to pay CGT on any profit you make on your original home because this is your principal residence.

If you continue to have 2 houses you will be charged CGT on any profits you make ( over your yearly c£10,000 allowance) on the 2nd house because it is not your principal residence.

Cgt is 28% or 18% if you don't earn much.

But if it was no longer my main home as I was living elsewhere, I was wondering if I would then lose out by paying CGT when selling it for massive profit despite having lived there for say ten of he previous 13 years?!

Cornucopia

[I bow to the wisdom of the wiser heads earlier in the thread who anticipated it would go this way].

The rules are designed to be fair-ish and there are a variety of exemptions and reductions that can be applied depending on your exact circumstances. The fundamental unfairness is that 2 small houses are usually treated less favourably than 1 big one, even if the overall values are the same.

In the situation you describe, assuming that you vacate the property for the purpose of letting it out, you can apply Lettings Relief, and also the final 18 months of ownership is exempt, too. The exact application of Lettings Relief and the amount relieved is dependent on your exact circumstances.

In short, we reached the scope of sensible general advice a while back. You either need to read the notes and ask specific questions, or describe a specific scenario or scenarios and ask for advice about those.