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Capital Gains Tax
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I suspect I may already know the answer to this but here goes anyway! We have a house (no mortgage) which for various reasons can't sell at the moment. We are considering buying another house with the intention of selling the current one possibly next year. Will we be subject to CGT? And if so...and I know this isn't strictly legal but what if we transferred the ownership to our son? It would be his primary residence when sold so I assume not taxable?? I hate to break the law but we have already lost so much on our house it will break my heart to pay CGT as well!
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If you buy another house this will NOT be classed as your main residence so therefore as long as you don't tell 'anyone' its your main residence you can live there for a while then sell your original house without paying CGT because this is your main residence. It would be like selling your main home to move into your holiday home. If you transfer it to your son then sell it in the future will your son give you back your money? if he does then you will be liable for CGT on that amount. You and your husband can make £21,200 in CG in the year before Tax but you probably know that.
Not quite right mags.
1) If your current house is going to sell for less than you paid for it, there's never any CGT liability anyway (because there's no CG).
2) The house that you declare as your Principal Private Residence (and you can choose which one this is, subject to a few simple rules like you have actually lived in it at some point) is never subject to CGT anyway.
3) It is possible to own two houses that both created gains and not pay CGT because the LAST three years of the ownership of a house is not counted for CGT purposes anyway.
The rest of Mags points are correct.
So you SHOULD tell HMRC that your new house is your Principal Private Residence as soon as you move in (in case the property market jumps soon afterwards. You would still have three years to sell the other house and no liability to tax, even assuming it did actually increase in value above the original purchase price.
1) If your current house is going to sell for less than you paid for it, there's never any CGT liability anyway (because there's no CG).
2) The house that you declare as your Principal Private Residence (and you can choose which one this is, subject to a few simple rules like you have actually lived in it at some point) is never subject to CGT anyway.
3) It is possible to own two houses that both created gains and not pay CGT because the LAST three years of the ownership of a house is not counted for CGT purposes anyway.
The rest of Mags points are correct.
So you SHOULD tell HMRC that your new house is your Principal Private Residence as soon as you move in (in case the property market jumps soon afterwards. You would still have three years to sell the other house and no liability to tax, even assuming it did actually increase in value above the original purchase price.
builders mate -
//because the LAST three years of the ownership of a house is not counted for CGT purposes anyway.//
so are you saying that if I bought a house (not primary residence) to renovate, with no intention of living in it, took a year to do it up , sold it for a £50k profit that I would not be liable for CGT on that profit because I owned it within that 'last three year' period?
If the property market jumps up then it jumps up on both properties so I can see no reason to tell the HMRC, based on that fact, that the 2nd property is the main residence, especially if they are downsizing and their new property is substantially less value that the other.
//because the LAST three years of the ownership of a house is not counted for CGT purposes anyway.//
so are you saying that if I bought a house (not primary residence) to renovate, with no intention of living in it, took a year to do it up , sold it for a £50k profit that I would not be liable for CGT on that profit because I owned it within that 'last three year' period?
If the property market jumps up then it jumps up on both properties so I can see no reason to tell the HMRC, based on that fact, that the 2nd property is the main residence, especially if they are downsizing and their new property is substantially less value that the other.
Mags - "so are you saying that if I bought a house (not primary residence) to renovate, with no intention of living in it,.............. no CGT to pay"
Not quite - one has to actually live in the second property for a period of time (and demonstrate that one has done so by, for example, getting one's post delivered there, paying CT and utility bills).
It's called playing the system.
"If the property market jumps up then it jumps up on both properties so I can see no reason to tell the HMRC....."
Fine except that, if there was a capital gain on the 2nd property, your suggestion of not informing could be tax evasion, as distinct from tax avoidance.
The purpose of the 'three year rule' to which I am referring was originally introduced to take account of what you are highlighting - that sometimes, with the best will in the world, householders end up with two properties for a period, having not sold one before buying another.
There's loads of stuff on it here: -
http://
The bit I'm referring to is:
"The final three years (36 months) always qualify for relief. This applies even if you weren't living there during the final three years. It must have been your only or main home at some point during the time that you've owned it."
Not quite - one has to actually live in the second property for a period of time (and demonstrate that one has done so by, for example, getting one's post delivered there, paying CT and utility bills).
It's called playing the system.
"If the property market jumps up then it jumps up on both properties so I can see no reason to tell the HMRC....."
Fine except that, if there was a capital gain on the 2nd property, your suggestion of not informing could be tax evasion, as distinct from tax avoidance.
The purpose of the 'three year rule' to which I am referring was originally introduced to take account of what you are highlighting - that sometimes, with the best will in the world, householders end up with two properties for a period, having not sold one before buying another.
There's loads of stuff on it here: -
http://
The bit I'm referring to is:
"The final three years (36 months) always qualify for relief. This applies even if you weren't living there during the final three years. It must have been your only or main home at some point during the time that you've owned it."
thanks Anniebird ;-)
@buildersmate you can get utility bills and your post delivered to your second home and never sleep a night in it. We have three houses on the go at the moment and only one is our primary residence but the utility bills are all sent to each individual home and its our names on them as we pay the bills. I suppose for HMRC purposes perhaps the address you are registered at for Tax purposes is classed as your main address -Having 'played the system' for around 20 odd years I've come to the conclusion that the least you tell anyone in Authority the better ;-)
@buildersmate you can get utility bills and your post delivered to your second home and never sleep a night in it. We have three houses on the go at the moment and only one is our primary residence but the utility bills are all sent to each individual home and its our names on them as we pay the bills. I suppose for HMRC purposes perhaps the address you are registered at for Tax purposes is classed as your main address -Having 'played the system' for around 20 odd years I've come to the conclusion that the least you tell anyone in Authority the better ;-)
Thanks everyone-that's very helpful. Buildersmate, can I just clarify something? You said that if we sold out current house at a loss (which is definitely what will happen) no CGT will be involved? Also, we haven't lived here 3 years yet if that makes a difference? The position would be, I hope, that we will get a mortgage and buy somewhere else then sell the current house next year. In that case I would consider the "new" house as our primary residence so would the money we get from the current house not be classed as CG? Thanks a lot.
If you make a loss (on anything - a house, some paintings, fine wine) there is no gain. The ins and outs of whether the house is your principle residence do not matter. Capital Gains Tax is only paid on Capital Gains. In fact, you can offset capital losses from some items against capital gains from others and so reduce your overall CGT liability.
Green-eyed:
NJ has concluded it for you - you have no worries that CGT will be an issue for you, as you say your current house will sell at a loss. The new house will not create a liability.
Mags:
Not sure what point you are now trying to make. If you are fortunate enough to have 3 houses, only one of them can be your principal private residence (PPR) at any one time; you can elect which house(s) have been your PPR over a time period; you MAY have to demonstrate to HMRC (if they query it) that you have at least lived in your elected choice(s) - in order that it qualifies as a PPR.
What more can I say? - as far as I can see my answers throughout are both consistent and correct.
NJ has concluded it for you - you have no worries that CGT will be an issue for you, as you say your current house will sell at a loss. The new house will not create a liability.
Mags:
Not sure what point you are now trying to make. If you are fortunate enough to have 3 houses, only one of them can be your principal private residence (PPR) at any one time; you can elect which house(s) have been your PPR over a time period; you MAY have to demonstrate to HMRC (if they query it) that you have at least lived in your elected choice(s) - in order that it qualifies as a PPR.
What more can I say? - as far as I can see my answers throughout are both consistent and correct.
hi builders mate -I guess the point I was making was that you don't have to have a property as your principal residence to get utility bills there. We are not that fortunate to have 3 houses 'on the go' -OH is a builder -its our business. As for the OP -they obviously haven't realised that Capital GAINS is just that a tax in money you make by liquidating capital assets. -how can you pay tax on a loss?? - oh well -ho hum as they say.
Im in a situation where I am selling a plot of land with planning permission we have had the land for 20 yrs and 50% is my sisters Im looking after fees to get £115000 do I have to declare to HMRC that I have sold it, if not how long do HMRC have to find out and contact me to collect CGT if I dont declare it
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