CGT and property

curtis122

I'm been doing some reading and over thinking this now and confusing myself so can someone please tell me straight.

We are putting our home on the market next year and expecting it to sell quicker then us finding a new house. Where we are moving to there are not that many properties that come up and when they do they go fairly quick, so expecting it to take a while to find somewhere(we will rent in the meantime if need be).

We also own a rental property which we have had years and is let out to a great tenant and has only ever been a rental. We have no intentions of selling it or moving into it, it will stay rented to our tenant.

When we sell our main home if we don't find the right home for ages, at any point will we be liable for CGT on our main home we sold. As its our main residence you won't get charged it but will owning a second rental property effect this in any way?

This is the line off HMRC where it applies for Private Residence Relief that bothers me - 

• you have one home and you’ve lived in it as your main home for all the time you’ve owned it

I own 2 but only one has been my home and main residence. 

Obviously hopefully the right house will come up sooner rather than later but we've lived in our current home for over 20 years and its increased quite a bit in that time so its something I just wanted clarification on.

mebu60

There's currently no CGT to pay on selling your main private residence (n.b. Budget end October).

p00hsticks

No, the way you describe it, with you selling prior to purchasing, there is no CGT concern. 

If it were the other way round, where you bought before selling, the CGT rules give you an extra nine months after a property ceases to be your main residence before you need to do the CGT calculation (and even then if you've lived in it for the majority of time it's unlikely that any CGT would actually be due).

as I understand it, the fact that you own other property that is NOT your main residence is neither here nor there for the purposes of CGT when selling your main residence.  

curtis122

Thank you. I started thinking there may be some time limit between selling your Main residence and finding your next home that will then be your Main residence and that possibly if that time passes then any second home you own may then take over as your 'main' as you own it even if you don't live in it. Said I started to overthink it !

Bookworm105

curtis122 said:

Thank you. I started thinking there may be some time limit between selling your Main residence and finding your next home that will then be your Main residence and that possibly if that time passes then any second home you own may then take over as your 'main' as you own it even if you don't live in it. Said I started to overthink it !

CGT main home relief applies to a single property for the relevant time period it was in use as main home, there is no  time limit on buying another main home. Each is considered for relief in isolation.

If you own one or more properties then which (if any) of them is your main home is a matter of occupational fact (or nomination) not what is your pattern of property ownership 

p00hsticks

curtis122 said:

Thank you. I started thinking there may be some time limit between selling your Main residence and finding your next home that will then be your Main residence and that possibly if that time passes then any second home you own may then take over as your 'main' as you own it even if you don't live in it. Said I started to overthink it !

As I understand it for tax purposes your main residence is where you actually live - whether that be owned or rented - regardless of what other properties you may own. 

 What might potentially affect you (and I don't know the exact rules on this) is whether you would eventually become liable for the higher rate of SDLT (or regional equivalent of not in England) when you come to buy as you already own one property.

There is an exemption for when are replacing your main residence, but I don't know if there is any time limit on how long you can have between selling one and buying the next. (Again, if it were the other way round and you bought before selling, you would initially have to pay the premium when buying but if you sell the old one within 3 years you can claim it back)

Bookworm105

p00hsticks said:

curtis122 said:

Thank you. I started thinking there may be some time limit between selling your Main residence and finding your next home that will then be your Main residence and that possibly if that time passes then any second home you own may then take over as your 'main' as you own it even if you don't live in it. Said I started to overthink it !

As I understand it for tax purposes your main residence is where you actually live - whether that be owned or rented - regardless of what other properties you may own. 

 What might potentially affect you (and I don't know the exact rules on this) is whether you would eventually become liable for the higher rate of SDLT (or regional equivalent of not in England) when you come to buy as you already own one property.

There is an exemption for when are replacing your main residence, but I don't know if there is any time limit on how long you can have between selling one and buying the next. (Again, if it were the other way round and you bought before selling, you would initially have to pay the premium when buying but if you sell the old one within 3 years you can claim it back)

you are correct re the time limit for claiming a higher rate refund

the test for main residence at point of purchase of the new one is that of "intent" (aka Condition D)
SDLTM09812 - SDLT - higher rates for additional dwellings: Meaning of 'main residence' - HMRC internal manual - GOV.UK (www.gov.uk)

Sim_2

To jump on the back of a useful thread, in the situation where you have homes, who decides which is the second home?

We own our family home (30 years plus) and a flat purchased 3 years ago initially as our holiday home (never let). For the past year, work has meant that I live in the Flat and my wife in the House which are hundreds of miles apart. Like the OP we will be selling the House and my wife will join me in the Flat before we start looking for a Down-size house which could take many months. On finding a Down-size house we would look to let the Flat.

Is there any danger that this plan could trigger CGT on the Family House sale?

Bookworm105

Sim_2 said:

Is there any danger that this plan could trigger CGT on the Family House sale?

Yes there is a danger
Married couples may only have one home between them, the same one for each person 
The flat was purchased >2 years ago so the time limit for making a written nonmutation of which of your 2 properties is the main home has passed.
Therefore which is the main home in reality will be a matter of fact as per previous links 

so once you both start living in the flat, the other now ex family "home" will be liable for CGT, although of course as it was once your main home, you have the final 9 months of ownership grace period added to the private residence relief period so it will only be liable for CGT on the proportion of time after that point 

sheramber

we will be selling the House and my wife will join me in the Flat

The house could be sold before  his wife moves into the flat.

Bookworm105

sheramber said:

we will be selling the House and my wife will join me in the Flat

The house could be sold before  his wife moves into the flat.

Selling the family home whilst she still lives in it is implicit to the wording: so once you both start living in the flat
or
the house can be sold anywhere from 1 day to 9 months after the wife moves into the flat.

Given it is described as the family home, we are assuming it is by the matter of facts actually the main residence, therefore the flat is liable for CGT for its entire ownership period to date