Capital Gains Tax on Second Property

If he's got a partner get it in both names then they benefit from two CGT allowances of around 8k each.

Also take professional advice, or he could ask the tax man for advice - don't know how objective they are though!

Bob

There was an article in the Money section of the Sunday Times last weekend on precisely the subject of reducing the cost of a second home. It's available here online. Basically, your friend needs to declare the house he is about to sell as his main residence.
John

Mike

The principles:

The gain is calculated as the difference between the sale proceeds and the purchase price.

The gain is further reduced by: legal costs on acquisition/disposal; Stamp Duty on purchase; agents' fees on disposal; costs of improvements (NOT repairs); indexation (a sort of inflation allowance).

The gain as calculated above is then reduced on a pro-rata basis for the number of years in which the property was the main residence. So using your example 6/14 or thereabouts of the gain is exempt from Capital Gains Tax. Additionally, as the property was let the last three years of the ownership are exempted so the exemption is actually 9/14 or thereabouts.

The gain as recalculated above can further be reduced by what is known as a let property exemption which is the lower of the chargeable gain or £40,000.

There is an annual exemption - approx £8K. If the property was jointly owned then the gain can be split and two annual exemptions claimed.

If there remains a gain chargeable to Capital Gains Tax this is taxed at the marginal rate ie any remaining basic rate band taxed at 22% and thereafter at 40%. The actual rate of CGT can be reduced by taper relief.

You are welcome to drop me a line or pt me.

Cheers

Mike

Oh, I should mention that there is no rollover relief available because the property is not a business asset.

Mike

Muchachos

Muchos gracias..from My Friend, of course...

Thanks very much for the replies.

Regards

Mike

Spending money I don't have on things I don't need.

Surely if the property is owned by a business and the profit spent on another property within the same tax year?

quote:

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Originally posted by Rasher:
Surely if the property is owned by a business and the profit spent on another property within the same tax year?

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A residential property is simply not defined as a business asset. So it is irrelevant that the proceeds are re-invested into anything.

Mike

Morning guys,


One thing not already mentioned is VCT's.

I am not an expert on the subject but I beleive the gain can be rolled over into a VCT. If the VCT is then held for 5 years the gain can be mitigated.

As I said I am not an expert so the above advice needs to be checked out before acting on it.


Regards


NB

Notwithstanding the rules, the VCT option disappears on 5 April so that looks like a non-starter.

Mike

quote:

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Originally posted by MichaelC:
A residential property is simply not defined as a business asset. So it is irrelevant that the proceeds are re-invested into anything.

---

But what about it being a property development company?

Hello,

Nice to hear about VCT? But is everyone out there a disconsolate accountant?

My name is taken from lowest region of the world, a dank, gloomy pit, surrounded by a wall of bronze, and beyond that a three-fold layer of night; it is one of the first entities to exist in the universe; primarily the prison for defeated gods and a place of punishment for sinners-just like my sense of humour!

quote:

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Originally posted by Rasher:
But what about it being a property development company?

---

Hadn't looked at this thread for a while.

Again, I am sure that you will find that a gain cannot be rolled over by a property development company unless the property in question was used for a trading purpose.

Mike

quote:

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Originally posted by tartarus:
Hello,

Nice to hear about VCT? But is everyone out there a disconsolate accountant?

---

VCTs haven't gone away. Investments in VCTs now attract Incoem Tax relief.

I certainly wouldn't call myself a disconsolate accountant!

Mike

I own two houses that I rent out in Swindon.

If I sell these two houses to buy another house in Spain which I will rent out over there, do I have to pay CGT.

Regards

Mick

Mick

I am pretty sure you would - the fact is that the sale in the UK is a disposal and has no bearing on your Spanish dealings.

Console yourself by going to see la Brightman

http://www.ticketmaster.co.uk/cgi/asp_events/byid.asp?event_id=1800378BF36EDE56&category=Performing_Arts

Regards

Mike

Spending money I don't have on things I don't need.

Mick,

If I sell these two houses to buy another house in Spain which I will rent out over there, do I have to pay CGT.
_______________________________________________________________

If you have made a gain more than the exemption of £8,200, then you will have to pay CGT. The fact you are investing in a Spanish property is irelevant, as rollover relief is not available for rented property, whether a property management company or not.

Regards


NB

Alex,

If you ever need any help on VCT's then drop me a line!


Regards


NB