Principal Private Residence

WYSPECIAL

Getting married next year and looking at the options for houses and minimising CGT as we will only be able to have one Principal Residence.

House A has been lived in by one party for 23 years. This is the house we plan to live in. No current plans to sell at any point in the future.

House B has been lived in by other party for 10 years. Current plan is to allow adult children to remain in this house and realistically sell in 5 years time.

From a CGT point of view which is best to nominate as PPR?

Is there any value to changing ownership so we are both joint owners of both properties rather than owning one each as at present?

silvercar

I wouldn’t do anything until after the budget, in case the rules change.

Under current rules, transfers after marriage between spouses won’t attract a tax bill. Plus your spouse acquires your PRincipal private residence relief and the residency that you had. So the gain would be the CGT allowance on sale. You would need to consider any difference in your marginal tax rates. Also the cost of doing the alteration to the deeds and getting consent from the lender if a property is mortgaged. Current CGT allowance is £3k, but no one knows what it will be in a few years time.

silvercar

On the face of it house B attracts potential CGT bill on 4.25/15 of the gain and house A on 4.25/28. Assuming a sale in 5 years time and exemption for the time it was one of your homes plus the last 9 months of ownership.

but it does depend on how much the gain is as to which of those fractions produces the greatest gain.

p00hsticks

If you aren't planning on actually living in House B at any point after the marriage I'm not sure that HMRC would accept you nominating it as your PPR after that point ?

WYSPECIAL

p00hsticks said:

If you aren't planning on actually living in House B at any point after the marriage I'm not sure that HMRC would accept you nominating it as your PPR after that point ?

It would still have our belongings in and we would stop there occasionally if more convenient than driving back to house A, eg went out for the night over that way.

WYSPECIAL

silvercar said:

On the face of it house B attracts potential CGT bill on 4.25/15 of the gain and house A on 4.25/28. Assuming a sale in 5 years time and exemption for the time it was one of your homes plus the last 9 months of ownership.

but it does depend on how much the gain is as to which of those fractions produces the greatest gain.

No plans to sell House A within our life times (but obviously things do change).
Could we nominate house B until it is sold then change the nomination to house A and gain further exemption for the years we do live in it again?

silvercar

WYSPECIAL said:

silvercar said:

On the face of it house B attracts potential CGT bill on 4.25/15 of the gain and house A on 4.25/28. Assuming a sale in 5 years time and exemption for the time it was one of your homes plus the last 9 months of ownership.

but it does depend on how much the gain is as to which of those fractions produces the greatest gain.

No plans to sell House A within our life times (but obviously things do change).
Could we nominate house B until it is sold then change the nomination to house A and gain further exemption for the years we do live in it again?

The important thing is to make the nominations within 2 years of marriage. Then it is all your choice which is PPR, if both are available to you. So staying occasionally would qualify, renting it out to non related people under a proper tenancy wouldn’t.

Obviously if you sell house B, then A would become your PPR as it would be the only property available to you, but yes you can change the nominations to suit. The calculation is done linearly, rather than any revaluing. 

Remember there is no CGT on death, so if you don’t sell there is no problem.

WYSPECIAL

silvercar said:

WYSPECIAL said:

silvercar said:

On the face of it house B attracts potential CGT bill on 4.25/15 of the gain and house A on 4.25/28. Assuming a sale in 5 years time and exemption for the time it was one of your homes plus the last 9 months of ownership.

but it does depend on how much the gain is as to which of those fractions produces the greatest gain.

No plans to sell House A within our life times (but obviously things do change).
Could we nominate house B until it is sold then change the nomination to house A and gain further exemption for the years we do live in it again?

The important thing is to make the nominations within 2 years of marriage. Then it is all your choice which is PPR, if both are available to you. So staying occasionally would qualify, renting it out to non related people under a proper tenancy wouldn’t.

Obviously if you sell house B, then A would become your PPR as it would be the only property available to you, but yes you can change the nominations to suit. The calculation is done linearly, rather than any revaluing. 

Remember there is no CGT on death, so if you don’t sell there is no problem.

Thank you,
Do you have any knowledge of what is allowed regarding allowance for improvements?
Both houses have been extended during ownership so clearly that would be allowed. But would replacing a 100+ year old roof or the boiler be deemed as maintenance you would expect to have to carry out during long term house ownership? What evidence of payments would they require?

AskAsk

HMRC has tightened up the Principal Private Residence relief, where you must actually live there as your main private residence to get the relief and not just nominate it but don't actually use it as your main home to minimise CGT.

silvercar

WYSPECIAL said:

silvercar said:

WYSPECIAL said:

silvercar said:

On the face of it house B attracts potential CGT bill on 4.25/15 of the gain and house A on 4.25/28. Assuming a sale in 5 years time and exemption for the time it was one of your homes plus the last 9 months of ownership.

but it does depend on how much the gain is as to which of those fractions produces the greatest gain.

No plans to sell House A within our life times (but obviously things do change).
Could we nominate house B until it is sold then change the nomination to house A and gain further exemption for the years we do live in it again?

The important thing is to make the nominations within 2 years of marriage. Then it is all your choice which is PPR, if both are available to you. So staying occasionally would qualify, renting it out to non related people under a proper tenancy wouldn’t.

Obviously if you sell house B, then A would become your PPR as it would be the only property available to you, but yes you can change the nominations to suit. The calculation is done linearly, rather than any revaluing. 

Remember there is no CGT on death, so if you don’t sell there is no problem.

Thank you,
Do you have any knowledge of what is allowed regarding allowance for improvements?
Both houses have been extended during ownership so clearly that would be allowed. But would replacing a 100+ year old roof or the boiler be deemed as maintenance you would expect to have to carry out during long term house ownership? What evidence of payments would they require?

Replacing a roof and replacing a boiler are both maintenance. Building an extension would be an improvement. Buying and selling costs are also allowed.

AskAsk said:

HMRC has tightened up the Principal Private Residence relief, where you must actually live there as your main private residence to get the relief and not just nominate it but don't actually use it as your main home to minimise CGT.

Any reference for that? Given hmrc still accept declarations of PPR,  I would have though that the home just needs to be available to you ie not rented out or occupied by others to the exclusion of the owner.

AskAsk

silvercar said:

WYSPECIAL said:

silvercar said:

WYSPECIAL said:

silvercar said:

On the face of it house B attracts potential CGT bill on 4.25/15 of the gain and house A on 4.25/28. Assuming a sale in 5 years time and exemption for the time it was one of your homes plus the last 9 months of ownership.

but it does depend on how much the gain is as to which of those fractions produces the greatest gain.

No plans to sell House A within our life times (but obviously things do change).
Could we nominate house B until it is sold then change the nomination to house A and gain further exemption for the years we do live in it again?

The important thing is to make the nominations within 2 years of marriage. Then it is all your choice which is PPR, if both are available to you. So staying occasionally would qualify, renting it out to non related people under a proper tenancy wouldn’t.

Obviously if you sell house B, then A would become your PPR as it would be the only property available to you, but yes you can change the nominations to suit. The calculation is done linearly, rather than any revaluing. 

Remember there is no CGT on death, so if you don’t sell there is no problem.

Thank you,
Do you have any knowledge of what is allowed regarding allowance for improvements?
Both houses have been extended during ownership so clearly that would be allowed. But would replacing a 100+ year old roof or the boiler be deemed as maintenance you would expect to have to carry out during long term house ownership? What evidence of payments would they require?

Replacing a roof and replacing a boiler are both maintenance. Building an extension would be an improvement. Buying and selling costs are also allowed.

AskAsk said:

HMRC has tightened up the Principal Private Residence relief, where you must actually live there as your main private residence to get the relief and not just nominate it but don't actually use it as your main home to minimise CGT.

Any reference for that? Given hmrc still accept declarations of PPR,  I would have though that the home just needs to be available to you ie not rented out or occupied by others to the exclusion of the owner.

I remember hearing on the news that HMRC had tightened up the main PRR relief because people were exploiting it but I couldn't find much when I googled.

I found this one here.  Effectively, it all revolves around the definition of residence for the PRR.

https://www.markmclaughlin.co.uk/main-residence-election-is-the-property-a-residence/