Downsizing and capital gains tax?

lindos90

I know this has been asked before, but when I searched, the discussions are from several years ago and I don't know if rules have changed since then.

Husband considering taking early retirement, with a plan to sort our house out and put the house up for sale a year later. Kids are grown up now, and we will therefore be downsizing.

Other half says he's researched and believes we will have some CGT to pay, if our new home is (hopefully) cheaper than the one we are selling.

From my search on here looking at previous threads, CGT does not apply if the house being sold, and the house being bought are/will be our main residence. Have the rules changed since then?

We are trying to work out if we can actually afford for him to retire early, and obviously the potential CGT we would have to pay (or not) will have a big influence over how realistic our plans are.

I'm crossing my fingers! Can anyone confirm either way please? Thankyou 👍

_Penny_Dreadful

lindos90 said:

I know this has been asked before, but when I searched, the discussions are from several years ago and I don't know if rules have changed since then.

Husband considering taking early retirement, with a plan to sort our house out and put the house up for sale a year later. Kids are grown up now, and we will therefore be downsizing.

Other half says he's researched and believes we will have some CGT to pay, if our new home is (hopefully) cheaper than the one we are selling.

From my search on here looking at previous threads, CGT does not apply if the house being sold, and the house being bought are/will be our main residence. Have the rules changed since then?

We are trying to work out if we can actually afford for him to retire early, and obviously the potential CGT we would have to pay (or not) will have a big influence over how realistic our plans are.

I'm crossing my fingers! Can anyone confirm either way please? Thankyou 👍

The rules have not changed.  You get Private Residence Relief (PPR) for the time a property was your only or main home so if the property being sold has always been your only or main home there will be no CGT to pay.

Dazed_and_C0nfused

https://www.gov.uk/tax-sell-home

Grumpy_chap

lindos90 said:

Other half says he's researched and believes we will have some CGT to pay, if our new home is (hopefully) cheaper than the one we are selling.

As others said, there is no CGT for selling the PPR.  I assume this was PPR for all the time it was owned.

Also, CGT (if it did apply) is only dependant on the asset being sold and no link to what you may buy afterwards.

I wonder whether this being mentioned is an indicator that the other half is not quite ready for the move.  They may know that this is the correct thing to do, but the heart may be catching up with the head.

jonnydeppiwish!

Have you lived there since you purchased/inherited/were gifted the property?

Doesn’t CGT rely on you having lived there all the time you’ve owned it?

I’m sure someone more knowledgeable will be along soon if you can answer the first question Op 👍 

trailingspouse

If you can afford to continue living in your existing house (and bear in mind it costs money to move), I would do so. Children leave home - but they come back and they don't come on their own. They come back with partners, kids, dogs and (in one particularly memorable instance) a pet rabbit...

lindos90

Thanks all for your replies, it is great news. I've asked OH where he got his info from and he can't remember, he possibly just assumed we would have to pay it. Definitely a good turn of events, and also shows us both that we need to do more research and be sure of things    @johnnydeppiwish Yes the house has always been our only residence since we bought it, so the PPR rules definitely apply.
@trailingspouse we would be going from a 4 bed in a decent school catchment to a 3 bed in an area without a school catchment premium, so still spare rooms for them to visit, if they want and still a decent amount should be left, even after moving fees. There would likely be at least a year after while we are sorting stuff out and selling, donating things as we have accumulated lots of things over the years.
@Grumpy_chap I doubt that very much, he can't wait to leave, his profession has ground him down, he dreads every day going to work 😞

I will suggest he does more research with me and comes to look at this site, and remind him of all the great advice I've always found here. Hopefully that will put us on the right track 👍

sheramber

Is he perhaps getting confused with stamp duty  land tax  which would apply if you bought your new homw before selling the current one?

However, you can claim the tax back if you sell within 3 years of buying the new house.

If you buy and sell at the same time that doesn't apply. 

lindos90

sheramber said:

Is he perhaps getting confused with stamp duty  land tax  which would apply if you bought your new homw before selling the current one?

However, you can claim the tax back if you sell within 3 years of buying the new house.

If you buy and sell at the same time that doesn't apply. 

Thanks sheramba, he could well have done tbh. We would definitely not be buying our next place before selling our current place.
 But as he's serious about retiring, we both need to get the facts right. I told him what I'd found out this morning, and he was really pleased, it feels one step closer, and just that bit more possible.

jonnydeppiwish!

trailingspouse said:

If you can afford to continue living in your existing house (and bear in mind it costs money to move), I would do so. Children leave home - but they come back and they don't come on their own. They come back with partners, kids, dogs and (in one particularly memorable instance) a pet rabbit...

The rabbit made me laugh!

In all seriousness though, kids can’t come back if there’s no room for them…..

RAS

Having realised that I'd missed an important bit of information about my pension rights, I realised I could go early. I'd savings but assumed I might have to work part-time until my state pension kicked in. It's not been necessary.

I'd suggest he doesn't make any decisions for the first year, and avoid taking on new responsibilities. I discovered that my living costs reduced considerably, although higher energy costs may alter that balance now. Take a break, then plan the preparations for the house move.

Having also cleared a very stuffed house, recognise that you will both get sorting fatigue, when you're taking longer to achieve very little. Take a break and you'll probably clear in two days what seemed to need a week's work.

You may want to have definitely retain, definitely get rid and " keep it until we know where we are going" categories.