2 properties for sale... how may CGT apply?

JC._3

I am selling my primary residence (owned for 2 and a bit years) and moving overseas.

I am also considering selling a second residence (a flat that was used during the working week) owned for just over one and a half years.

I am unsure whether i will pay CGT on the second residence. I am assuming that it has increased its value by £40K and i am a 40% tax payer. The reason i am unsure is down to the various nuggets of gold info you guys come up with in different circumstances.

any help is appreciated

JC.

nlpnlp

You can only have one property as your Pricipal Private Residence (PPR) at any one time, although by use of PPR elections you can effectively claim relief for a period of 3 years on a second property.

When you buy a second property you have 2 years in which to make an election as to which is your PPR (this needs to be made in writing and sent to your tax office). The significance of PPR is that no gain arises for the period that a property is your PPR. You say that you bought your second property 1 and a half years ago. You are therefore still in time to make an election to make your second residence your PPR. If a property has at any time been your PPR then the last 3 years of ownership will qualify for PPR relief. Therefore if you sold both properties within 1 and half years from making the election both properties would be covered by PPR relief - as the last 3 years of ownership will by covered by PPR along with any earlier qualifying periods. You are therefore effectively backdating PPR relief on your second property.

It is not necessary that you elect for your actual main residence to be your PPR, as long as both are homes, you get to choose. Making such an election does need to be thought through. What if you don't in fact sell the properties now but hang onto them for a number of years and the gain on your primary residence is bigger than the gain on the flat. It may also be affected if you are married. You can however vary an election at any time but only go back 2 years.

JC._3

hey thanks nlpnlp!

so to be clear:

1. I am selling my house which was bought in May 2003. It has gained value.
2. I am selling my flat bought in dec 2003. It has gained value.

I can nominate my flat as my PPR within 2 years of buying it - making the house the 2nd residence.

So i do not have to pay CGT on the flat?

I also do not have to pay on the house as it was my PPR within the last 3 years.

Do i have that right?

So in short, if you own 2 properties and sell them within 3 years of buying them you have no problems with CGT?

Cool Thanks! Google (finding this site) and you have saved me a tidy sum!

JC

nlpnlp

Your house has been your PPR from May 2003 to say August 2005 when you switch PPR to your flat. You get an extra 3 years of PPR relief on the house as it has at some time been your PPR. You therefore have until August 2008 to sell it.

The flat will be your PPR from say August 2005 and provided you sell it by December 2006 the last 3 years will be covered by PPR; ie from December 2003 when it was bought.

JC._3

to quote the great sage Alan Partridge "Back of the net!" or to be a little more 'appropriate' "Cashback!"

Thanks again nlpnlp

JC