Whats the best way to buy a second property and not pay capital gains tax?

rune2000

Hi,

Im sure one of you can help me.

I want to buy a second property which is £140k.(house2)
My Current house has equity of £300k.(house 1)

I am wanting to know what is the best way to buy the second property using the CGT exemptions to their maximum.

Ideally I want to keep my current house (house 1) as my main residence for four years..then live in the second house for one year (house 2) ..then sell house 2 and move back to house 1..Renting out unoccupied houses as I go.

Im fairly flexible..but I need to be in the second house in year 4.I could sell house 1 if that is really the best way to go in year 4.

Could someone sort me out a plan which my brain will let me understand.

Thanks in advance...ta

sneekymum

I'd start by getting a few names on the deeds....that's many people x annual CGT allowances when you come to sell...

Kenny4315

You are assuming that there will be a gain in the next 4 to 5 years on a property you are buying now ? Given the state of the market and the likely price falls I would not be so sure of having any CGT tax liability in the next 4 years.

If you rented your main residence, and moved to another place, then that is free from CGT providing it is sold within 3 years (or it used to be may have changed now), from the date it was not your main residence, with certain proviso's on it's land size, use when it was main residence, etc.

On the subject of the CGT on the buy to let investment, then it would be CGT liable providing there was a gain, it's been a while since I did CGT, so I would get a leaflet from the inland revenue on the matter, or alternatively go on the web-site and you can download the details, there used to be indexation when dealing with such items, which would nullify all but extremely large gains which are now unlikely.

Do not be fooled into thinking Buy to Let is a walk in the park and a licence to print money, maybe it was 5 years ago but the market conditions have significantly changed, don't expect large scale capital appreciation for the foreseeable future. It is now a major risk, personally if your looking at investments think very seriously about this one at this point in time. If the market crashes not only will your main house get hammered so will the rental property. Even a small 10% downturn on £140 + £300 (assuming this is value of main house - may in reality be more) = £440k is £44k.

paulh

It may be worth looking at the furnished holiday let scheme. If you rent you second house out for at least 10 weeks a year then you can write off any loss (inc. mortgage payments) against perosnal income tax and althought the CGT biull does not dissapear, it reduce it 10%.