Stamp duty, second home refund

ChilliBob

Blimey, interest too! Many thanks for the confirmation, I sensed it wasn't too much of a pain but good to hear from someone with on the ground experience  

weezie7

We are in a similar position. Hoping to complete on smaller property, soon, and then put current house on market and sell. Aware of extra 3% SDLT and ability to claim it back if 'current' house is sold within 3 years, which is our aim, as we have some relatively small building work to do in new property to make it habitable. We are tenants in common on both properties. In relation to CGT, very basic question, how do we know if we have to pay it? Who decides? I know there will be a gain (possibly £100k), as our current house has gone up in price, and I believe it is a proportion of the extra amount and some time length, but don't quite understand all of it, also something about an extra 9 months....?

AdrianC

You don't pay CGT on the proportion of time you've lived in the house.
You do pay it on the proportion of time you haven't lived there.
The first nine months you don't live there is counted as time you have lived there, as a transition.

So if you live in a place for six years and three months, then move out and sell it three years and nine months later, you'll pay CGT on three years out of ten - 30% of the gain.

If you're not living there for less than nine months, you won't pay any CGT at all.

oldbikebloke

weezie7 said:

We are in a similar position. Hoping to complete on smaller property, soon, and then put current house on market and sell. Aware of extra 3% SDLT and ability to claim it back if 'current' house is sold within 3 years, which is our aim, as we have some relatively small building work to do in new property to make it habitable. We are tenants in common on both properties. In relation to CGT, very basic question, how do we know if we have to pay it? Who decides? I know there will be a gain (possibly £100k), as our current house has gone up in price, and I believe it is a proportion of the extra amount and some time length, but don't quite understand all of it, also something about an extra 9 months....?

for tax questions you must provide precise details:
"we" means?
- legally married /civil partnership, or just "good friends"
- how many properties do "we" currently own? Your statement appears to suggest there is only one, that which you both currently live in and own as TIC co-owners.

If that is so, then it is the main residence for both of you and therefore would not have any CGT at all if sold within 9 months of you moving out of it and buying a new main home.

Furthermore, with a gain of "only" 100k, and the availability of a personal allowance for CGT (not the same as income tax allowance) per owner, you would need a gap of years between buying new, and then selling old, before you had a net taxable gain that would cost you more than a few tens of £ in CGT .

The answer to your second question is the UK tax system works on a SELF ASSESSMENT basis - you are expected to teach yourself what you are liable for taxwise and pay it before HMRC finds out you didn't and penalises you for your failings.
If that is too much for you, then you are free to pay an accountant to do it for you instead.
. 

pjcox2005

You talk about multiple properties so you can only have one principal private residence (your home) at any one time. So the period you're both living in House A as principal private residence, then house B that you both own would not qualify and therefore a capital gain could be arising as you wouldn't automatically get relief (although you could get a different relief for periods where you haven't lived there as well as using you capital gains personal allowance if not already used).
HS283 Private Residence Relief (2020) - GOV.UK (www.gov.uk)
If unsure go on the tax forum and list values and history of all properties e.g. Prop A, bought Dec 2000, £70k, selling now £300k. Lived in it till Dec 2015 but not since then etc. Same for property B.

oldbikebloke

pjcox2005 said:

You talk about multiple properties so you can only have one principal private residence (your home) at any one time. So the period you're both living in House A as principal private residence, then house B that you both own would not qualify and therefore a capital gain could be arising as you wouldn't automatically get relief (although you could get a different relief for periods where you haven't lived there as well as using you capital gains personal allowance if not already used).
HS283 Private Residence Relief (2020) - GOV.UK (www.gov.uk)
If unsure go on the tax forum and list values and history of all properties e.g. Prop A, bought Dec 2000, £70k, selling now £300k. Lived in it till Dec 2015 but not since then etc. Same for property B.

when reading that link take careful note that it applies to tax year 19/20 (to 5 April 2020)
for tax year 20/21 and onwards, some aspects have significantly changed, ie no letting relief 

also "House B" may get some relief since OP refers to "small building works" and therefore might (depending on exact details) be able to claim first 24 months exemption due to "failure to take up residence" subject to meeting conditions.... (including date of sale of "A")
CG65000 - Capital Gains Manual - HMRC internal manual - GOV.UK (www.gov.uk)

weezie7

Thanks for all the replies. We (partner, not married, are TIC) for current and new home. I will have a good look at all the highlighted stuff, very helpful, thank you. It will also depend on how quickly we sell current house too, hopefully very soon, as we want to move as current house is getting too much for us!! 

ChilliBob

I'm skimming over this, since it still applies to us (probably, not found a new house, our house we've just taken off for a couple of months).

I'm confused by this 9months vs 3 years business? And changes for tax year 2021-22

For simplicity in our case I own the house we live in and I'll buy the house we're going to move to. 

davidmcn

ChilliBob said:

For simplicity in our case I own the house we live in and I'll buy the house we're going to move to. 

In which case you can ignore the stuff above about Capital Gains Tax, which may be why you're getting confused.

ChilliBob

Yeah, that's part of it, also the 9months vs 3 years, which is pretty different!