Capital Gains Tax on two propertys

[cris r]

Ok can anyone explain how this would work. We have two houses One is a four bedroom house which we had lived in for nine years.We also bought a new house two years ago with the idea of renting it out.
( we dont have pensions) but we decided to move into the newer property as we thought that the older house would take the strains of a family. How would this effect us selling one of the propertys can we nominate the older property as we have lived in that for the longer period.

[cris r]

Yeh thanks eddie No just an ordinary girl

[buildersmate]

You probably need to take proper (paid for) advice to make sure you get this right, but I believe that you will be able to sell the original house and pay no CGT provided you get your skates on.
The original house has no CGT payable up to the point you moved out of it - it was your only (and hence your Principal Private) Residence. Its only when you moved into the new house that a POTENTIAL issue might start to arise. However HMRC allows a double houseowner a period of time in which to sell the ORIGINAL house without incurring any CGT liability - and I'm sure you know that the liability would only EVER exist on the gain between the value at the date you moved out and the date you sell it - not on the whole of the value change from the date of original purchase.
This period of time can be a maximum of three years - so you are still within time to avoid CGT completely - but I can't explain in a few words how to do this.

[cris r]

Thanks builders mate this is what we thought. We will make sure that we visit our accountant. We were not sure if the new buget would have an effect on our situation.
Thanks again x

[buildersmate]

Here is HMRC's Help Sheet number 283 on Private Residence Relief. It should tell you what you need to know if you want to DIY.
http://www.hmrc.gov.uk/helpsheets/hs283.pdf
It also says that HMRC will help you - this doesn't mean that they will tell you how to avoid taxation but they will advice on whether tax is payable if you tell them your proposed course of action.

[BenDToy]

I second the advice to get an accountant. However my understanding is that you can "nominate" the new house as your main residence, but it must be within 2 years of purchase, If you then live there for a period (no specific time) it will then be exempt from CGT for a further 3 years. You must be able to demonstrate that it is your main home eg electoral roll, utility bills, mail forwarding etc. In the meantime you can sell the other house and you also have 3 years before that one will incur CGT. But ask a professional, this is a complex area. And do it very quickly because of the 2 year limit.

[buildersmate]

Yes, that is the gist of it, Mr Bendy. Very succinctly put.