Two houses, tax implications, any knowledge pls

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  • Two houses, tax implications, any knowledge pls
  • DrP
    Member

    As i understand it,You are correct that you have ‘three years to sell the house’before tax implications, but I would be interested to clarify the second part of your question..

    DrP

    b r
    Member

    Or you could just keep it as your ‘address’ for tax purposes.

    Worked for MP’s etc 🙂

    craigxxl
    Member

    Why are you moving house? Is it work related ie another country or present home is just too far from work?
    Let me know and I’ll be able to answer your question

    gusamc
    Member

    Hi, sorry, but want to understand tax issues if I end up with more than 1 house – as it will make the buying/selling chain free and allow the possibility of renting.

    If I hang on to my main house (lived there permanently > 10 years) and end up living with gf in a new house I believe I have a 3 year window where my ‘ex main house’ remains CG tax free irrespective of whether I rent it – is that correct ?

    If I were to rent if for > 3 years on what are you CG taxed on ? – from original purchase date, from starting rent date, from starting renting date + 3 years

    Any other knowledge greatfully received.
    Thanks

    gonefishin
    Member

    When I sold my place this is how the gain was calculated. I’m guess the procedure hasn’t changed but the tas rates and allowances may have.

    First you have to figure out the total capital gain

    (Selling price – purchase price) = gain

    The purchase price is the actual price you paid. Calculate the gain per month of ownership again this is based on the total time you owned the place, lived in + rented.

    Calculate the tax exempt portion of the gain

    Exempt = Gain per month * (number of months lived in property + 36)

    Subtract this and the Capaital gain allowance (assuming you’ve not used it for anything else!)from the total gain to give a taxable portion.

    Taxable portion = gain – exempt – allowance

    Multiply this Taxable portion by the capital gain rate (it was 18% when I sold my flat but it may be different now) to give the total amount you will owe HMRC.

    Tax Payable = Taxable portion * CGT rate

    gusamc
    Member

    live seperately from gf and planning to move in together to new house (as we live 40 miles apart) which suits both.

    Not being in a chain appeals and longer term I think (*maybe) renting my house would be better

    What I think is the case
    – if I sell my ‘old main house’ within 3 years(Unrented) it is CG tax free
    – if I rent it for those 3 years its is still CG Tax free
    – if I rent it for > 3 years (with it declared as my main home) then
    I will pay CG tax based on:
    – entire length of ownership
    – time as main home/time rented/ – 3 years/ empty time
    HMRC
    You bought your house in January 2000 and sold it in
    December 2012, owning it for thirteen years. You lived
    in the property as your only or main residence from
    January 2000 to December 2005 (six years). It was then
    let as residential accommodation
    from January 2006 to December 2008 (three years) and
    then empty until sold at a gain
    of £150,000. You are entitled to Private Residence
    Relief for nine years (six years of
    residence plus final 36 months) out of thirteen
    years this part of the gain is £103,846
    (9/13 x £150,000). Your remaining gain is £46,154.
    The lowest of the three limits set out above is the
    gain by reason of the letting £34,615
    (3/13 x £150,00) so you are entitled to further
    letting Relief of £34,615. Your chargeable
    gain will be £11,539.

    *Curently don’t understand letting relief.

    craigxxl
    Member

    Gusamc, that is correct but it’s calculated in months not years. You then deduct your capital gains allowance (currently £10,600)from the gain and pay tax at the 18 or 28% depending on your income.
    If you tie the knot with the girlfriend then you are able to gift all or part of the property to her too with no capital gains. When you do this you can make use of her capital gains allowance too or transfer the remaining chargeable gain to a lesser rate of tax.

    Remember that in calculating the gain it’s the selling price less selling and legal fees less the cost of the property less any purchases fees.

    Letting relief is the lower of £40k, the PPR or gain when it was let

    gusamc
    Member

    cheers Craig – not all good news, might have to get married !!!!!!

    need to do some maths – trouble is although I’ve owned house for ages it’s gained quite a lot – so by renting > 3 years I open that gain up to tax (admittedly on a %time scale)

    craigxxl
    Member

    All the gains you have made are covered for your first 3 years renting already. You would need to be make large gains again whilst renting to be paying any CGT and such a housing boom is unlikely now.
    Best thing to do is keep repeating the calculation after 3 years renting and do so annually. When it looks like you are going to be paying capital gains tax start thinking about selling then but it will need to be weighed up against rental income too.

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