CGT on Sale of Main Residence

DontTellMyMother

Bit confused about the piece in the 'Sunday Times' (14/7/2019) regarding CGT payable on the sale of a main residence. The link is:
https://www.thetimes.co.uk/article/new-capital-gains-tax-rules-could-trap-homeowners-fqwmbx0cj
The piece talks about a 9-month window to avoid CGT.

(1) Regarding CGT: I was not aware that CGT applied to the sale of a main residence. The piece mentions a 9-month window in which to sell the main residence before CGT kicks in. We completed on a new property in mid-April 2019 but kept our existing residence in order to do up the new one. Will this 9-month window apply from April 2020 or will it apply (in our case) to 9 months from April 2019?

(2) Regarding Stamp Duty: We paid additional Stamp Duty because we did not sell and buy simultaneously. We understand that if we sell our existing house within three years, this additional Stamp Duty will be refunded. Will a 9-month window also apply to the refund of the additional Stamp Duty?

Thanks in advance for comments.

DTMM

joshp1993

So:

CGT - The sale of a main residence is exempt from CGT. However, the current time limit is 18 months for this exemption, so if you keep your old main residence for longer than this, it is deemed to be an investment property and so you will pay CGT when you sell it. It may seem harsh but to play devil's advocate, you need a set timeframe or else someone could sell their house 5 years down the line and claim that they were trying to sell it but couldn't agree a sale just to avoid CGT.

However, the good news is that the amount of gain that the CGT is due on is pro-rated based on your ownership length and how much of that time is was not exempted. So if you'd owned the old house for 10 years and then bought the new one, if you kept it for another 2 years, you would be liable for the period that doesn't count as ownership or exempt - so currently that's 10 years and 18 months. So total ownership is 144 months but only 6 months of that is not exempt, so if you made a gain of 100k from 12 years ago, then you'd be taxable for 6/144ths of the gain, so £4,167. This would be at a rate of 18% or 28%, so potentially a CGT bill of up to £1,167. However you also have an annual exemption from CGT of £11,700 currently, so you'd have nothing to pay if you hadn't already used this up!

Stamp Duty - You have a 3 year window to sell your old home from when you buy your new one. You then have 3 months from sale to claim back the higher rate of stamp duty you'll have paid.

Hope this helps!

DontTellMyMother

Very many thanks for your prompt and detailed reply ... all noted about CGT.
With regard to the Stamp Duty, I note that the window is still 3 years but someone mentioned that this may be reduced.
DTMM

G_M

DontTellMyMother wrote: »

Very many thanks for your prompt and detailed reply ... all noted about CGT.
With regard to the Stamp Duty, I note that the window is still 3 years but someone mentioned that this may be reduced.
DTMM

When and how to get a refund

If you sell or give away your previous main home within 3 years of buying your new home you can apply for a refund of the higher SDLT rate part of your Stamp Duty bill.
You cannot get a refund if:

• you or your spouse still own any part of your previous home
• the higher rates still apply to you for another reason

https://www.gov.uk/guidance/stamp-duty-land-tax-buying-an-additional-residential-property

SDLT_Geek

I have heard nothing about a proposal to reduce the three year SDLT window and SDLT is what I do!

DontTellMyMother

Thank you for that additional comment.
DTMM