Quizzes & Puzzles1 min ago
Capital gains tax on second home
3 Answers
We are buying a small second home to be near to family and will still keep our main home for a year or so, dividing our time between the two.. If we decide to permanently move to the second home area, we will sell our main home and the second to buy a more suitable property. We realise capital gains tax will be payable on the second home (subject to there being an increase in the price, some chance at the moment!), but apart from our individual capital gains allowance, would we be able to deduct the cost of any improvements made to the property - eg kitchen and bathroom upgrades? We are definitely going to have to upgrade them in order to live there ourselves. All advice appreciated.
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No you can't do that (offset improvement costs) unless you are running it as a business.
But what do can benefit from (and given the timescales with propose this looks like a real winner for you) is the knowledge that HMRC allows the final three years of ownership of a property that is not your 'principal private residence' (PPR) to be exempt from any capital gain. The way to do this therefore is to declare with HMRC that your new home is your PPR as soon as you buy it, and make damn sure you dispose of the old home within the three year period. None of this matters, of course if there was no CG on the old house during the period when it is not your PPR and outside the '3 year grace' window, and you would still get your annual CGT allowance in any event, even if there was a CGT liability.
All in all, you should feel confident in avoiding having any CGT liability.
Some stuff on PPR and Private Residence Relief here.
http://www.direct.gov...ntalIncome/DG_4020890
But what do can benefit from (and given the timescales with propose this looks like a real winner for you) is the knowledge that HMRC allows the final three years of ownership of a property that is not your 'principal private residence' (PPR) to be exempt from any capital gain. The way to do this therefore is to declare with HMRC that your new home is your PPR as soon as you buy it, and make damn sure you dispose of the old home within the three year period. None of this matters, of course if there was no CG on the old house during the period when it is not your PPR and outside the '3 year grace' window, and you would still get your annual CGT allowance in any event, even if there was a CGT liability.
All in all, you should feel confident in avoiding having any CGT liability.
Some stuff on PPR and Private Residence Relief here.
http://www.direct.gov...ntalIncome/DG_4020890
Any accountants out there?
My partner and I have owned a second home since 2001, and which has appreciated considerably in value.
It is held in joint names.
Our main residence is held in his name.
We are not married/civil partnered, but still classed as single.
We would like to move to the 2nd home in a couple of years time after seling our main home.
How long would we have to live in the 2nd home(now main residence) before being able to sell it without being liable for capital gains tax?
Might it be better for me to declare the 2nd home as my main residence now?
Thanks
B
My partner and I have owned a second home since 2001, and which has appreciated considerably in value.
It is held in joint names.
Our main residence is held in his name.
We are not married/civil partnered, but still classed as single.
We would like to move to the 2nd home in a couple of years time after seling our main home.
How long would we have to live in the 2nd home(now main residence) before being able to sell it without being liable for capital gains tax?
Might it be better for me to declare the 2nd home as my main residence now?
Thanks
B
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