Apologies typo error uninhabtable is the word I meant to use, thanks for pointing this out!
You then ask
Do I understand correctly that the first 12 months of ownership of property 1 is cgt free because it was undergoing renovation?
Yes so 12 months from the date of purchase HMRC permit to make it habitable
Quote "And any build on the land is likley to attrcat capital gains unless this once built (with a 12 month period) becomes your main residence."
When does that 12 month period begin? The day it is signed of as completed by building control?
Thw 12 months date starts when you start work on the land to build
"2) If I move into house 2 within 1 year of purchase, once house 1 is sold, am I right in thinking that first year or ownership will also be exempt from cgt? Or does that exemption not exist where the new property is rented out?"
I was not clear, but this question related to property 2. As I understand it, where you buy a new property to move into, but delay moving in for a period up to one year, due to the sale of your original property taking time, maximum period of one year will be exempt from cgt, even if it has not yet become your PPR. Is that correct?
No thats not correct
If that is correct, does that exemption disappear if you let it out during that first year?
No as it doesnt exist in the first place
Quote "3) If I eventually move into property 2 (becoming my PPR), then get planning for a new house in the garden, will a cgt (or even IT) liability arise if-
3a) I sell the plot to a developer- Capital gains will arise"
I appreciate that cgt may apply on the eventual sale of property 2, because it has for a time been let. Are you also saying that if I move into property 2, therefore becoming my PPR, gain planning on the attached plot (currently part of the garden of property 2), and sell the plot to a developer, that cgt will be payable on the plot sale? If yes, then why? I thought that sale of part of a garden of a PPR is cgt exempt.
No as you would have plannd to make a profit from it - so clearly had not enjoyed this as a garden but saw this as an oppotunity to make a profit.
Quote "3b) build the new house myself and then move into it as my third PPR, either selling property 2, or renting it again?
Then the new build will not be liable to capital gains IF you build within 12 months and stay living there throughout the period of owmnership OR sell within 18 months of a move out."
IF I build within 12 months of when?
From the start of the build
Quote "5) What would be the most tax efficient way to handle this opportunity?
Build 3 (within 12 months)- move into 3 - sell 1 withihn 18 months of moving out
and either retain 2 or sell 2 - knowing there is capital gains to consider, on which you cannot alter that fact."
OK, if I follow that route, how will cgt on property 2 be calculated, bearing in mind that a chunk of garden of property 2 will have been separated to build the new house that I move into? I ask this because property 2, when sold, will have a lower value due to having less land attached, so I suspect I cannot offset the full purchase price of property 2 in calculating the capital gain. To use some numbers, property 2 purchase price incl costs was £390k, probable sale value would only be £325k without the garden plot. That would give rise to a loss of £65k, but is essentially the cost to me of the plot I built my new PPR on.
Calcualting the capital gain is over and above what you asked for within y
post to Just Answer, If youw ish this additional work to be undertakent hen I can either
1) Send an additional Q & A request for an additional free which can be actioned after you rate the initial service OR
2) Post a new question after rating this one
But I will advise that whilst Property 2 will have a lower value to a chuck of land being removed - the value of that chuck of land then is taken into account with the new build -
The fact you choose to reduce its value of Property 2 - will be reflected in so far as that, the sale value would be less