Buying a 2nd property before selling my 1st

cairnsyyy

Hi,

I’m looking at buying a 2nd house

I will be selling my 1st house but there is no guarantee that it will sell in time of buying the 2nd house.

I understand that I will have to pay higher stamp duty, which I can claim back but what about Capital Gains tax? If I sell my first home a few weeks later if their any kind of liability?

Bookworm105

for CGT you are allowed a 9 month overlap period between moving out of your old house (it ceasing to be your main home) and you finally selling it - during that time it is exempt from CGT.

That is to cover the exact scenario you have, simultaneously owning 2 properties "unintentionally" because the first did not sell before the second was purchased and was occupied as the new main home.

bobster2

And even if you go longer than 9 months - the CGT liability is likely to be small. It will only be based on the gain for the period when when the house was not your main residence.

p00hsticks

bobster2 said:

It will only be based on the gain for the period when when the house was not your main residence.

not quite correct - the gain over the whole period that the house was owned is used in the calculation, but it's  (roughly speaking) multipliied by the proportion of time when it wasn't your main residence)

BPauseMSE

I have similar query please.  I have owned and lived in my current home for over 25 years.  The current home has been the main residence of both myself and my wife during the 25 years, although the title and mortgage has always been in my sole name (bought when living together but before married).  My wife and I are preparing for retirement and are looking to purchase a second home in her name (title and mortgage), with a view to living between both for a few years whilst we do the second one up.  We live in Scotland and know that there will be the additional dwelling supplement of 6% to pay on purchase of second home, in addition to standard LBTT.   
So, a couple of queries:
- if we sell existing house within 36 months are we able to reclaim ADS paid on second home?
- would any capital gains tax be due on existing home when sold and if due how is this calculated?
Thanks

silvercar

BPauseMSE said:

I have similar query please.  I have owned and lived in my current home for over 25 years.  The current home has been the main residence of both myself and my wife during the 25 years, although the title and mortgage has always been in my sole name (bought when living together but before married).  My wife and I are preparing for retirement and are looking to purchase a second home in her name (title and mortgage), with a view to living between both for a few years whilst we do the second one up.  We live in Scotland and know that there will be the additional dwelling supplement of 6% to pay on purchase of second home, in addition to standard LBTT.   
So, a couple of queries:
- if we sell existing house within 36 months are we able to reclaim ADS paid on second home?
- would any capital gains tax be due on existing home when sold and if due how is this calculated?
Thanks

If you are married, hmrc only allow you to have one PPR between you. So whereas a lender may be prepared to consider your wife purchasing on her own with her own mortgage, hmrc will require you to choose which is to be your PPR. If you actually live between the 2 you can choose and change is my understanding. You need to make the first declaration as to which it is to be within the first 2 years of owning both.

For CGT it is the total gain of the time of ownership, with the months it was your PPR and the last 9 months of ownership exempt. You also have a CGT allowance. If you transferred the property into joint names before sale, your wife acquires your date of acquisition and its value at the time, so you split the gain between you and both have a CGT allowance, plus your marginal rates of tax may be different.

ADS rules changed April 2024 - https://revenue.scot/taxes/land-buildings-transaction-tax/additional-dwelling-supplement-ads

BPauseMSE

silvercar said:

If you are married, hmrc only allow you to have one PPR between you. So whereas a lender may be prepared to consider your wife purchasing on her own with her own mortgage, hmrc will require you to choose which is to be your PPR. If you actually live between the 2 you can choose and change is my understanding. You need to make the first declaration as to which it is to be within the first 2 years of owning both.

For CGT it is the total gain of the time of ownership, with the months it was your PPR and the last 9 months of ownership exempt. You also have a CGT allowance. If you transferred the property into joint names before sale, your wife acquires your date of acquisition and its value at the time, so you split the gain between you and both have a CGT allowance, plus your marginal rates of tax may be different.

ADS rules changed April 2024 - https://revenue.scot/taxes/land-buildings-transaction-tax/additional-dwelling-supplement-

Thank you.  Which type of advisor would I be best to seek advice from for this matter?

silvercar

BPauseMSE said:

silvercar said:

If you are married, hmrc only allow you to have one PPR between you. So whereas a lender may be prepared to consider your wife purchasing on her own with her own mortgage, hmrc will require you to choose which is to be your PPR. If you actually live between the 2 you can choose and change is my understanding. You need to make the first declaration as to which it is to be within the first 2 years of owning both.

For CGT it is the total gain of the time of ownership, with the months it was your PPR and the last 9 months of ownership exempt. You also have a CGT allowance. If you transferred the property into joint names before sale, your wife acquires your date of acquisition and its value at the time, so you split the gain between you and both have a CGT allowance, plus your marginal rates of tax may be different.

ADS rules changed April 2024 - https://revenue.scot/taxes/land-buildings-transaction-tax/additional-dwelling-supplement-

Thank you.  Which type of advisor would I be best to seek advice from for this matter?

Probably here - https://forums.moneysavingexpert.com/categories/cutting-tax - you’d get all your questions answered. 

If you want a professional accountant then ask around for an accountant that deals in personal tax. Make sure they are qualified.

Bookworm105

what further advice do you want?

if you want real numbers crunched then your solicitor will do the ADS at the time of purchase and you'd be better getting a qualified accountant to do the CGT at time of sale