CGT and stamp duty on second homes

Jon_Butler

Hello
I have a second home (leasehold) which I rent out and wish to sell it to buy a larger property (freehold) to also rent out. As I would be investing the entire sales proceeds (plus a lot more) in the new property do I need to pay any CGT on the sale?
Also as I'm not buying a "new second home" merely upgrading it would I still have to pay the new 3% stamp duty?
From what I've read to date it's not absolutely clear how HMRC view this - any info would be gratefully received

AdrianC

Jon_Butler wrote: »

I have a second home (leasehold) which I rent out and wish to sell it to buy a larger property (freehold) to also rent out. As I would be investing the entire sales proceeds (plus a lot more) in the new property do I need to pay any CGT on the sale?
Also as I'm not buying a "new second home" merely upgrading it would I still have to pay the new 3% stamp duty?
From what I've read to date it's not absolutely clear how HMRC view this - any info would be gratefully received

If you own multiple properties, then the only property you can "upgrade" and not pay the +3% is your primary personal residence.

CGT is payable on the growth in value over your ownership, no matter what you do with the sale proceeds.

bowlhead99

Jon_Butler wrote: »

I have a second home (leasehold) which I rent out and wish to sell it to buy a larger property (freehold) to also rent out. As I would be investing the entire sales proceeds (plus a lot more) in the new property do I need to pay any CGT on the sale?

Also as I'm not buying a "new second home" merely upgrading it would I still have to pay the new 3% stamp duty?

From what I've read to date it's not absolutely clear how HMRC view this - any info would be gratefully received

Yes it is clear how they view it.

If you sell a property you don't live in, you have to pay tax on the gain (less exemptions and reliefs) no matter whether you use the proceeds to buy a new investment property or spend it down the pub. There is no relief just for buying a bigger or better investment property.

If you buy a new 'second home' whether as a replacement second home or as an increase to the number of homes you own, you will be paying the extra stamp duty rate.

There is no indication of either of those facts being a 'grey area' on the HMRC web pages.

00ec25

SDLT
no question about it, you own 2 properties, one is a BTL (ie not your home)

• you sell the BTL, so you have gone from 2 to 1 property ownership
• you buy a (bigger) BTL, you have gone from 1 to 2 properties owned, you have purchased an additional property and pay the higher rate
• if you decide to buy before you sell then you also pay the additional rate as you have not replaced your main home, merely purchased an additional property so triggering the higher rate

CGT
I will give you the benefit of the doubt over your "readings". You perhaps saw reference to "roll over relief"? Rest assured that does NOT apply to the purchase of residential property, ie you will have to pay CGT on the gain of the small BTL when you sell it. As others say above, what you then spend the money on is irrelevant.