taxation

[BRIGHT SPARK]

What would be my tax liabillity if i built another house on my plot and then lived in it for 2 years?. My old property would be rented out and taxed on the net income.

[buildersmate]

You can only have have one 'main residence'. That UK residence is free of UK CGT.
Therefore your old house would incur CGT on the enhancement in its value (if any) in the final 2 years when you rented it out.

[Tom Braider]

I assume questioner means the CGT liability if he sells the old property after 2 years living in new house. The main residence is free of CGT for the time he's lived in it PLUS 2 years (so that people who have to move but can't sell their house for a while aren't penalised). So chargeable gain on main house would still be nil if sold within that time. If he's talking about selling the new house and then moving back into the old one, he'd still be OK so long as the new house was to be regarded during that time as his main residence. The old house would then incur CGT as soon as it was sold 'cos it's already had the 2 years "free".

[buildersmate]

You may be right, Tom, but I think there's an issue if you rent the first one out. You'd have to show that you were treying but you hadn't been able to sell it. To hang onto it deliberately as a rental property would incur an interest from HMRC because this is not the purpose of the double-ownership clause in the legislation.

[BRIGHT SPARK]

Thanks guys

[Tom Braider]

Maybe, mate, but where relief is restricted because of letting and some or all of the dwelling house has been let as residential accommodation a further relief may be available under TCGA92/S223 (4). This relief applies to a disposal after 5 April 1980 which attracts relief under TCGA92/S222.