Capital Gains Tax On Second Home

1jacks64

I saw a solicitor a couple of years ago who is according to the law society allowed to advise on tax law, trust law and wills and probate. I saw the solicitor to have a deed of variation drwn up on my grandmother's estate.

While I was at the solicitors I asked him the following question -

"If I purchase a house but do not live in it how can I avoid capital gains tax when I sell it ?"

The solicitor said "As long as you go to live in the property for at least 1 complete tax year before you sell it you will not have to pay any capital gains tax."

I have looked everywhere on websites for confirmation on this. I have looked on the direct.gov website and the HMRC website but have found capital gains tax advice but it does not say anywhere what the solicitor said.

I am looking to purchase a second property and I just want to know whether what the solicitor told me is right as I cannot find the answer anywhere on official websites.

Many thanks.

silvercar

If you live in a property as your main residence for any length of time you are exempt from CGT for the time it was your home and the last three years of ownership. You are also able to utilise letting relief (max 40k). There is also your CGT allowance if not used elsewhere.

So in a sense your solicitor was right, but taken to extreme he's not. If you lived in it for one year and then let it out for 19 years, out of 20 years of ownership you wouldn't pay CGT on a fifth of the growth and would have some allowances against the rest. So whether you faced a bill would depend on how the property increased in value.

fengirl_2

The one year residence rule is a myth, which is why you can't find anything about it. HMRC look at the quality of the residence rather than the length. They would be looking at whether you took on telephone and utility accounts in your name at the address, whether you registered to vote, whether you had all your mail redirected, infomred your children's school of the move, your employer, etc etc.