Relationship between Council Tax on "Second Home" & Capital Gains Tax exemption on "Main Residence"?

Spreadsheet_Man_2024

Bit of a long thread here, but bear with me:

1. My wife and I each own a home (mine is in London, hers is on the coast a few hours from London), both of which were purchased before we married a couple of years ago.
2. As a married couple we understand that we can only declare one property (for the purposes of capital gains tax, CGT) as a “main residence” (irrespective of the amount of time spent there), which would be exempt from CGT, should it be sold.
   
3. We’ve decided to declare my London home as that “main residence” since it has had the greater appreciation in value and my wife does not wish to sell her house.
4. The council in the area where my wife’s coastal home is located have decided to use powers under the Levelling Up and Regeneration Bill and charge a 100% council tax premium on “second homes”.
5. As my wife currently works and lives in London with me for the majority (70%) of the time, her council consider her home to be a “second home”. However, in future we plan to spend the majority of time at her coastal home.
6. My question is: When we move to my wife’s coastal home (for most of the time) in the future, will we be permitted to declare my wife’s home as her “first home” (for the purposes of Council Tax), thereby not paying the “second home council tax premium”, while also declaring my London home as our “main residence” (for the purposes of exempting me from Capital Gains Tax)? Or is the law sufficiently “joined up” to prevent this?
7. An alternative way to phrase this question might be: Is there a single concept in UK property and tax law of a “main residence” or “first home” which applies to all taxation types e.g., council tax, capital gains tax? Or is such a concept just determined on a tax-by-tax basis?   

If anyone knows the answer, I'd be interested to hear it. 

Bookworm105

Spreadsheet_Man_2024 said:

Bit of a long thread here, but bear with me:

1. My wife and I each own a home (mine is in London, hers is on the coast a few hours from London), both of which were purchased before we married a couple of years ago.
2. As a married couple we understand that we can only declare one property (for the purposes of capital gains tax, CGT) as a “main residence” (irrespective of the amount of time spent there), which would be exempt from CGT, should it be sold.
   
3. We’ve decided to declare my London home as that “main residence” since it has had the greater appreciation in value and my wife does not wish to sell her house.

you say you married 2 years ago. The exact date of that is critical because, as a married couple, that restarted the clock for the "combination of properties".

CG64525 - Private residence relief: only or main residence: two or more residences: nominations on marriage or on registering as civil partners - HMRC internal manual - GOV.UK (www.gov.uk)

you say you have "decided to declare" London but have you actually done so yet?
The time limit for nominating ("declaring") main home is strictly enforced:
CG64530 - Private residence relief: only or main residence: two or more residences: treatment of notice - HMRC internal manual - GOV.UK (www.gov.uk)

CG64545 - Private residence relief: two or more residences: no valid notice made - HMRC internal manual - GOV.UK (www.gov.uk)

if you miss that deadline, then you cannot nominate anything, as it is then based on "a matter of facts" for CGT purposes. As you explained, your living circumstances support the fact London is the main home, and as married couple you can only have one main home, which must be the same for both of you, in your case, it's London 

if you have missed that deadline, then when you move to the other property you will lose CGT main residence status at London so your second question is then academic, as the coastal property will be main residence for both CGT and CT as a matter of fact.

alternatively, if you have nominated within the deadline then the answer to Q2 is CT and CGT are not connected. The nomination of London does not impact CT. The coastal property would be your (marital) main home for CT purposes, whilst London remains main home for CGT (until such time as you make a new nomination).
This is a reasonable summary of how a council assesses your occupation for that purpose:
Sole or Main Residence - Gosport Borough Council

in summary,
CGT nomination is a paper exercise, if affects CGT only  
CT main residence is a practical exercise based on the evidence of living there as "clarified" in court test cases

(BTW not relevant on what you have said so far, but you cannot nominate a property which is let out to tenants. Technically you a declaring it to be your home, it must therefore be available as one, so cannot be the home of a tenant as then it is not available to you, whether you use it or not)

Spreadsheet_Man_2024

Thanks for your comprehensive reply. We married two and three quarter years ago, in August 2021. At that time my wife's property was let out to tenants who left at the end of March 2023. We had no access to her property (and didn't start using it) until April 2023, some 14 months ago. The CGT declaration was made this month, so over 2 years since we married but less than 2 years since we started using it.   

lincroft1710

There is no correlation between CT and CGT, they are subject to completely different legislation

Bookworm105

Spreadsheet_Man_2024 said:

Thanks for your comprehensive reply. We married two and three quarter years ago, in August 2021. At that time my wife's property was let out to tenants who left at the end of March 2023. We had no access to her property (and didn't start using it) until April 2023, some 14 months ago. The CGT declaration was made this month, so over 2 years since we married but less than 2 years since we started using it.   

you are correct that reverting from let to available is a new combination of residences, so resets the clock

Justinr

So, if CT is separate from CGT could the following be done:

For CT:
1. I declare my main residence is House 1 (but I dont claim the 25% single occupancy discount)
2. My wife declares her main residence as House 2 (again she doesnt claim the 25% single occupancy discount)

For CGT
1. Our main residence is House 1

Also, how exactly would a council know that any house I have in their area is a second home? We pay full CT on it.

Bookworm105

Justinr said:

So, if CT is separate from CGT could the following be done:

For CT:
1. I declare my main residence is House 1 (but I dont claim the 25% single occupancy discount)
2. My wife declares her main residence as House 2 (again she doesnt claim the 25% single occupancy discount)

For CGT
1. Our main residence is House 1

Also, how exactly would a council know that any house I have in their area is a second home? We pay full CT on it.

this forum is not intended for you to ask advice on how to commit a criminal offence (tax evasion)

you are married, so a married couple can only have ONE main residence between them, ie. it must be the same property for both of them....

Here is a random google result which may get you started, it's probable your council will have similar info on its website...all you need do is read it 
Who should pay for Council Tax | Westmorland and Furness Council

HS281 Capital Gains Tax civil partners and spouses (2024) - GOV.UK (www.gov.uk)

Grumpy_chap

Bookworm105 said:

you are married, so a married couple can only have ONE main residence between them, ie. it must be the same property for both of them....

If a married couple are in a financial position that supports them having a main home in London plus a holiday home at the coast, why would they risk the stress and potential prosecution (with all the negative outcomes that would bring) of not simply paying the relatively small surcharge in CT?

I know the 100% CT surcharge is a reasonable sum, but it is "relatively small" in the context of all the other costs of running a second home.

uknick

Justinr said:

So, if CT is separate from CGT could the following be done:

For CT:
1. I declare my main residence is House 1 (but I dont claim the 25% single occupancy discount)
2. My wife declares her main residence as House 2 (again she doesnt claim the 25% single occupancy discount)

For CGT
1. Our main residence is House 1

Also, how exactly would a council know that any house I have in their area is a second home? We pay full CT on it.

How do they know you don't live there as a main residence?  They could use the electoral roll.

elmer

At my council you are asked to make a declaration. If this turns out to be false, and we do make  various checks and have access to a range of Government info, then there can be a £250 fine as well as the back dated charge to pay.

rodscott

when my wife and I left London for the coast in 2008 and she alone bought a house there, I retained my flat in London as sole owner. Unfortunately we left the correspondence address for council tax etc for my wife on the coast as the London flat as this was convenient for moving etc. An oversight. My wife conducts her life at her house on the coast, local activities etc. and I spend a lot of my time there. we both pay council tax on our properties. My wife’s leaving my address with the coastal local authority has given them the idea they can charge a 100% council tax premium on the basis the coastal  house is a second home. They say there is a presumption that as marrieds we reside in the same principal residence and based on the address mistake quoted above they seem to think the principal residence is the little used london flat. Can anyone comment. Please