Do i pay CGT on 2nd home?

LionKing

Hi,

I initially bought a residential place in Edinburgh (late last year). My work has caused me to move permanently to London and i have just recently bought a property just outsode of London.

I have just had clarification of my situation and will no longer need my Edinburgh flat. Will i need to pay CGT if i sell even though it is one of my residential properties.

Do i need to pay CGT? If so how much? Is there any way of getting away with this (legally)....any advice from some sharp accountants much appreciated ;-)

sneekymum

Don't forget you've got a CGT allowance - £8,500 this year

Have you studied this thread http://forums.moneysavingexpert.com/showthread.html?t=59203 ???

Richie(UK)

Hi LK,

You say 'a' residential place in Edinburgh. Was this your only or main residence? If so then, based upon the information provided, there will be no CGT to pay.

The main residence is exempt from CGT (where there is more than one then you may elect which property is to be considered the main one - in the absence of an election the Revenue will make a ruling based upon the facts of the case). Furthermore, the last 36 months of ownership qualify for relief even if you are not living there. Given that you only bought the property last year you should be fully covered (this assumes that you did actually move into the property and occupy it as your main residence for a period of time).

All that aside, as sneekymum indicates it may well be that any gain you make would be covered by your annual exemption in any case. What sort of gain are we talking about?

LionKing

Thanks All.

Richie.... i think gain may be about 20-25k.

How should i play this? I have been back and forth between Edinburgh and London property. Should i elect the Edinburgh as main residence as i will probably not be selling London property for 1.5 -2 years. Will i be stung for CGT when i come to sell London property?

Greentea

Since your Edinburgh residence was your main residence before you moved last year, you will not have to pay any CGT on this property unless you have the 2 homes longer than 3 years.

There are various allowances and reliefs which are given if CGT is due, but i dont see that it is due in your case.

bojangles1310

Forget about having to use an acountant to calculate your CGT, unless you already employ one for your other tax liabilities/self assessment.

The reason i say this is becasue last year i sold a second home i have had for 15yrs, IR sent me a self assessment for the CGT. I rang the tax office and they went thru the whole form with me (and it is quite a convoluted form and calculation). The end result, was no CGT!! due to the taper system, the CGTalowance, the fact that i had lived there as my main residence and that i had let it, this all meant lots of deductables. I would strongly recommend you ring your Tax office first and go thru the form, line by line, ensure you have all the figures (bought and sold, dates etc) before hand, and do the form in pencil first.

BoJ

brantwood150

bojangles1310 wrote:

The end result, was no CGT!! due to the taper system, the CGTalowance, the fact that i had lived there as my main residence and that i had let it, this all meant lots of deductables.

Taper relief on a house?

Greentea

Yes there is taper relief .... the longer you have owned the house the greater the relief.

Twopints

brantwood150 wrote:

Taper relief on a house?

Yup. Normally your house is not subject to CGT as long as it is your Principal Private Residence.

If you have a property (or other asset) that is liable for CGT then taper relief applies. It can reduce the gain liable to tax by up to 40% after 10 years (commencing 1998 or year of acquisition, whichever is later)

Lawbag_2

there is a grace period (you will need to check) during which you can sell a property and not have to pay CGT as long as you reinvest it.

I am sure it would work the other way, in that you borrowed a second amount to purchase house no.2 with the genuine intention that house no.1 was always going to be sold to "fund" house 2.

someone prove me wrong or right

Greentea

Lawbag wrote:

there is a grace period (you will need to check) during which you can sell a property and not have to pay CGT as long as you reinvest it.

I havent heard of this before .... it would be interesting to know if anyone knows more about this.