Capital Gains Tax

Ferreira11

Hi, I currently have 2 properties and intend to sell one of them but would like some advice in regards to Capital Gains Tax as to which one is the best one to sell.

We have owned our main property since 1992, purchased for £105,000 and now worth £650,000

We purchase a 2nd property in 2018 for £245,00 and now valued at £495,000

If we sell our main property to live in the 2nd one which would become our main residence. DoI have to pay CGT? or in the future if I was to sell it in say a couple of years.

Or if we chose to continue to live in main property and sell the 2nd property, I am assuming we would need to pay CGT on the profit.

[Deleted User]

Second option first - you would pay Capital Gains tax on the second property. The gain would be £495000 less £245000 less purchasing and selling costs less the cost of any improvements. It is in joint names and each of you would have an annual exemption of £12300 to utilise.

On the other option - no CGT on the main property if it has been your main residence throughout. When you ultimately sell the second property, having moved into it, the gain will be time apportioned between the time it was your main residence and when it wasn’t. For example if you owned it for ten years when you sell (120 months) and lived in it for 60 months, 69/120 of the gain would be exempt as 9 months is added to the relief of it was your main residence at some point. 

Ferreira11

Hi, thanks for the response and clear explanation. If for argument sake the 2nd became our main residence when we brought it in 2018 but we still kept our original house and rented it out. Would we still have to pay CGT on the 2nd house if we sold it.

[Deleted User]

Ferreira11 said:

Hi, thanks for the response and clear explanation. If for argument sake the 2nd became our main residence when we brought it in 2018 but we still kept our original house and rented it out. Would we still have to pay CGT on the 2nd house if we sold it.

No - as it would have been your main residence throughout. However - there would be a chargeable gain on the first house when eventually sold on the same time apportionment basis. 

Ferreira11

Okay thanks for your help it is very much appreciated 

p00hsticks

Ferreira11 said:

Hi, thanks for the response and clear explanation. If for argument sake the 2nd became our main residence when we brought it in 2018 but we still kept our original house and rented it out. Would we still have to pay CGT on the 2nd house if we sold it.

No, but you'd be building up a CGT liability on the first property instead.