Capital gains tax on houses and the law?

Jimster_s_2

can somebody confirm the law on captial gains tax to do with buying and selling houses.

i thought the law was that you can only sell your own house (main residence) and not pay capital gains tax on it. i thought that if you owned your own house and bought another one to renovate and sell it then you would be liable for cgt on it.

now from reading my other threads this might not be true. can i own my own house and also buy as many other houses to renovate and sell and not pay any cgt on them as long as i sell them them within 3 years?

i didnt think you could do that. i thought you would have to temp rent your own house out and move into the new one while you renovated it (with it being your main residence) then sell it and move back into your own original house to stay cgt free.


well if i was wrong and you can buy and sell houses while you own your own and stay cgt free then would this situaltion also be ok?

say for example somebody owned 3 houses. could that person keep moving houses to keep them cgt free when sold? what i mean is this

3 houses owned. live in house 1.
when house 2 has been owned for nearly 3 years move into that house. house 2 is now the persons main residence.
house 1 can now be owned for 3 more years and be sold without paying cgt.
when house 3 has nearly been owned for 3 years move into house 3 and 3 will become the main residence.
when house 2 is moved out of this can now be owned for 3 more years and sold without paying cgt.
repeat as above.

this would then keep all 3 houses free from cgt if they are moved into within 3 years of not being your main residence. this could be repeated for ever and all properties would stay free from cgt if they are ever sold. this could be done for however many houses you have but obviously the more you have the harder it gets and also you would have to keep moving house.

Rafter

I believe the 3 year rule only applies where you physically move house and rent out the first house. This is then free from GCT for 3 years after which normal CGT and taper relief rules apply.

You can avoid CGT by 'electing' which property is your principle residence, but this can often just lead to defering a larger tax liability on another property.

R.

Rikki

I too have a question? The 1st house bought with ex in 1989 moved into house no 2 in 1992 (still my main residence) and rented out house no1. House no1 has now been sold am I subject to capital gains tax?

reddevilled

Jimster_s wrote:

say for example somebody owned 3 houses. could that person keep moving houses to keep them cgt free when sold? what i mean is this

3 houses owned. live in house 1.
when house 2 has been owned for nearly 3 years move into that house. house 2 is now the persons main residence.
house 1 can now be owned for 3 more years and be sold without paying cgt.
when house 3 has nearly been owned for 3 years move into house 3 and 3 will become the main residence.
when house 2 is moved out of this can now be owned for 3 more years and sold without paying cgt.
repeat as above.

Broadly speaking a property is classed as being your principal private residence when you physically live there PLUS the last 3 years of ownership (assuming you lived there at some point). There are other times when it is counted as your PPR such as working abroad etc.

So basically no, your example wouldn't work. Using the 36 month rules is a way of delaying the sale of your PPR but shouldn't be used as a way to try and avoid capital gains tax.

If you are a serial renovater and use the PPR exemptions to avoid tax then the HMRC may well declare that you are actually trading and therefore are not entitled to the PPR exemption OR your annual exemption :eek:

reddevilled

Rikki wrote:

I too have a question? The 1st house bought with ex in 1989 moved into house no 2 in 1992 (still my main residence) and rented out house no1. House no1 has now been sold am I subject to capital gains tax?

Potentially yes, although you will be entitled to principal private residence exemption on a proportion of it (the period you lived there + the last 36 months). You may also be entitled to letting relief although I can't quite remember the rules for that - think you may have had to move back into the property again to qualify.

anji_2

anji wrote:

Hi there, I wonder if anybody could answer my question?
I am in the process of selling my residental home that i have lived in for 6 years. I also own another property that i have rented out for just over three years. I am thinking of moving into this second house when my first house is sold and paying off the mortgage on it. What are the tax implications?? :T

reddevilled

anji wrote:

anji wrote:

Hi there, I wonder if anybody could answer my question?
I am in the process of selling my residental home that i have lived in for 6 years. I also own another property that i have rented out for just over three years. I am thinking of moving into this second house when my first house is sold and paying off the mortgage on it. What are the tax implications?? :T

Assuming that you have only owned your home for the 6 years in which you have lived there, there will be no Capital gains tax implications on the sale of this property.

If you then move into your other property, which you currently rent out, then there will be no tax implications until you sell. When you do sell that property a proportion of the gain on the property may be taxed. You will be exempt for the time that you actually lived there (ie from now onwards) and the final 36 months. Eg if you sell in a year, you will have owned the property for 4 years total, 3/4 of the gain will be exempt. The other 1/4 will be subject by CGT but open to the usual annual exemption and taper relief etc.

Hope this helps,

Red

Paul_O'Kshields

I have a similar query to this which I have also posted on a thread in the property forum, so sorry for inflicting deja vu on anyone who reads both:


I bought a property in London in 2000.
Lived in it for 18 months.
Met Girl from Glasgow. Moved to Glasgow to be with girl, effectively "paying rent" to her while cohabiting - I do not own any share of her property.
Meanwhile, rented out my own place in London.
Am now selling my own place, but will be living in it for a while until sale completes, because my work is taking me back down to London.
Am I liable to pay capital gains tax on the proceeds? If so, what relief if any am I eligible for on the CGT?

All advice gratefully received.

SCREAMIN_BABIES

Capital Gains Tax What A Load Of W***
£10,000 They Have Just Stung Me For , For Selling A Property I Rented Out They Want 40%of The Profit You Make On The Hose I Hate Tony Blair

Richie(UK)

SCREAMIN_BABIES wrote:

Capital Gains Tax What A Load Of W***
£10,000 They Have Just Stung Me For , For Selling A Property I Rented Out They Want 40%of The Profit You Make On The Hose I Hate Tony Blair

lol - CGT was around long before Blair came to power

Ian_W

Paul O'Kshields wrote: I bought a property in London in 2000.
Lived in it for 18 months.
Met Girl from Glasgow. Moved to Glasgow to be with girl, effectively "paying rent" to her while cohabiting - I do not own any share of her property.
Meanwhile, rented out my own place in London.
Am now selling my own place, but will be living in it for a while until sale completes, because my work is taking me back down to London.
Am I liable to pay capital gains tax on the proceeds? If so, what relief if any am I eligible for on the CGT?

From reading advices on these threads and doing some research re my CGT issues [so no expert] my opinion is best case no GCT, worst case next to no CGT.
Arguable that it's always been your principal residence [ppr] and is exempt - as you don't co-own in Glasgow. If that isn't the case, ignore last 3 yrs ownership + 18 months you resided in it as your ppr and you have only 6/12 months as a proportion of your ownership to count in terms of your total capital gain. You would then be able to apply taper relief, relief for letting and your personal all of £8.5k before tax is due at your normal rate.
Example: Gain £120k, owned for 60 months. 120 x 6/60 = 12k minus reliefs & allowance = not very much @ 20 or 40%.
Probably worth paying an accountant in Glasgow [cheaper than London] to check the figures before you do a SA return.