Temporarily buying a second home, stamp duty, capital gains questions

wingsmc

I am currently looking to move house, but am a little confused concerning the rules on stamp duty & capital gains tax.
I am not looking to profit in any way from the house sale, just I have a lot of stuff to move/organise so will end up with 2 properties for a period.

To outline my situation, I currently own my home outright & have a large hobby garage/workshop in the garden & I wish to move to a larger property, but this will unlikely have somewhere ready made for my hobby workshop, so my plan is to buy a new property & build / set up my workshop before moving in & then putting my old home on the market.
I understand I will have to initially pay the 3% stamp duty surcharge on the new property as it will temporarily be a 2nd home, but can claim it back if I sell my old home within 3 years.

What most confuses me is the potential to end up paying capital gains tax if I don't sell my old property quick enough. New rules say 9 months?
If I was to buy the new property but still live in my old property until I was ready to sell it, would it be 9 months from moving out, or 9 months from buying the new property? & will I still be able to claim back the 3% stamp duty if the new property is not initially my main residence?

Thank you

oldbikebloke

CGT is 9 months from purchase of 2nd home (technically it is from the date you exchange contracts for the purchase, not the "completion" date and certainly not the date you physically move in)

SDLT refund - at the point of purchase there is an intention for the new one to be the main home. It does not have to physically be the main home. 

wingsmc

Thank you, that makes things a little clearer.
One more question on the CGT however, I have owned by current property for 11 years & it's value has risen quite a lot in that time.  If I go over the 9 month period, is the CGT payable on the whole 11 year period or just the amount of time exceeding the 9 month period?

oldbikebloke

wingsmc said:

If I go over the 9 month period, is the CGT payable on the whole 11 year period or just the amount of time exceeding the 9 month period?

let me give you the long winded answer...
1. CGT is always due on the whole gain for the entire ownership period on the sale of any (UK) property

2. However. where that property has been lived in as main/only home, you can claim an exemption as a deduction from the gain for that actual period (plus the final 9 months of ownership if it is not the main home during those 9 months).
The exemption is therefore a simple fraction: exempt period / ownership period = % 

3. the CGT gross gain calculation is therefore simply = 1 - 2
ie: Gain minus (gain x exempt %) 

in layman's terms, yes, only the period after 9 months, assuming it was main home for the entire ownership prior to the final 9 months 

Angela_D_3

wingsmc said:

Thank you, that makes things a little clearer.
One more question on the CGT however, I have owned by current property for 11 years & it's value has risen quite a lot in that time.  If I go over the 9 month period, is the CGT payable on the whole 11 year period or just the amount of time exceeding the 9 month period?

@Crashy_Time that ;-)

wingsmc

oldbikebloke said:

wingsmc said:

If I go over the 9 month period, is the CGT payable on the whole 11 year period or just the amount of time exceeding the 9 month period?

let me give you the long winded answer...
1. CGT is always due on the whole gain for the entire ownership period on the sale of any (UK) property

2. However. where that property has been lived in as main/only home, you can claim an exemption as a deduction from the gain for that actual period (plus the final 9 months of ownership if it is not the main home during those 9 months).
The exemption is therefore a simple fraction: exempt period / ownership period = % 

3. the CGT gross gain calculation is therefore simply = 1 - 2
ie: Gain minus (gain x exempt %) 

in layman's terms, yes, only the period after 9 months, assuming it was main home for the entire ownership prior to the final 9 months 

Thanks for your answers on this, they are very much appreciated & helping me understand what seems at first a  complex subject.

So as I plan to stay in my current house as my main residence until such a time as I have got the new property into order to move my workshop etc,  Am I right in thinking that the 9 month period will only begin once I declare my new property as my main residence?

oldbikebloke

wingsmc said:

So as I plan to stay in my current house as my main residence until such a time as I have got the new property into order to move my workshop etc,  Am I right in thinking that the 9 month period will only begin once I declare my new property as my main residence?

you are talking about property B needing "works" to it before you move in.

The 9 month period on property is therefore largely irrelevant provided you meet the following conditions on B - which as you 'll see reading this link means that relief is available on two residences at the same time
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65013

maisie29

Can I pay for a house in cash using my savings and then give it to my brother, I would not be charging him rent, I want to give him the house. (We both live in Scotland)

macman

You can give your brother whatever you want. but, if you give him the property, you couldn't then charge rent anyway, because you won't own it. 
Why not just give him the money to buy the house himself?