I have a wife and 2 children. We all lived at the flat from 1998 to 2006 with the children going to school locally. After 2006 they moved to the new house and went to school there.
The flat has 2 bedrooms. My wife and I own both properties. I receive utility bills at both addresses, tv licence at both addresses, council tax at both addresses, my tax returns go to the flat, my wife's P60 went to the flat until 2011, we are both registered to vote at both addresses, my bank statements and credit card bills go to the new house, my wife has bank statements going to both addresses.
I have my mother, brother, nieces, uncles and aunt living minutes away from the flat still. We have friends who live near the flat but we also have new friends who live near the house.
As my wife still works part time near the flat, I would say that we both have social lives equally at both places.
I'm not sure about your 1st question about the family spending time at the flat. After 2006 they moved to the house so they only visited the flat on some weekends and holidays to see other family.
It was July 1998 and April 2006.
Hi again.Since you didn't make a main residence election, the decision as to which of the two properties is your main home will be based on the facts. Having read what you typed in your last post, I'm afraid that it will be a tough nut to crack for each of yourself and HMRC. The fact that you have a lodger does not impact on your claim to main residence relief.If you took the view that the house became your principle private residence from April 2006, then the £430,000 gain from selling the flat for £500,000 having paid £70,000 for it will be split as follows:Exempt gain £233,970 (£430,000 / 204 months x 111 months), £215,000 eachNon-exempt gain £196,030 (£430,000 / 204 months x 93 months), £98,015 eachOf each of your non-exempt gains, the first £11,100 would be tax free due to the annual CGT exemption for 2015/16 (assuming the property is sold in July 2015) leaving you each with a net taxable gain of £86,915. Take a look here to see how CGT is calculated.Your CGT rate or combination of rates (18% and 28%) will be determined by the level of the sum of your income and net taxable gain in the tax year you sell the flat. The highest each of your CGT liabilities could be £24,336 (£86,915 x 28%).Accepting that the flat ceased to be your principle private residence from April 2006 will protect the inherent gain in the house from CGT.As I stated above, this will be a difficult case to argue either way. What you need to consider is how much of the house inherent gain you are potentially exposing to CGT if you try to claim that the flat was your main residence for the entire period of ownership and what your long term plans are as far as continuing to live in the house are concerned. There isn't really anything you can do to reduce your liability on the flat other than not to sell it and, instead let it for a number of years so that on a future disposal, you may benefit from letting relief if it still exists at that time. Letting relief can be worth up to £40,000 per part owner as you will see in HS283 here.I hope this helps but let me know if you have any further questions.
A correction. The figure next to the bracketed exempt gain calculation should read £116,985, not £215,000.
Did you receive my last question about lettings relief on a lodger and my business loss in 2013?
If I assumed that the flat is my 2nd home, then would having a lodger entitle me to lettings relief? Is a lodger the same as a letting? Is there a minimum time limit to qualify for lettings relief?
In November 2013, I sold a business with a loss of £17k. Can this be offset against CGT?
According to my calculations the gain on my house is about half as much as the gain on the flat if it was sold now. What would you do if you were me? Would you ask HMRC directly?
Thanks for your thoughts. However I don't understand your last paragraph 'at worst, the CGT would only be 11% of the gain'.
Also what is a certificate of tax deposit?
Thank you for your time. There are a few more other things I'm still unclear on and would like to ask more but I need to go as it's very late now. So far I've been satisfied with the answers.
Hi, carrying on from yesterday, can I elect a main residence if I buy a 3rd property and what impact would it have on the previous 2 homes?
If you buy a third property, you have a new two year window to make an election for one of the three to be treated as your main home. However, you won't really gain anything as far as the flat is concerned unless you continue to own it and make it your PPR. If you let a property, it cannot by definition be your PPR. You will still have an argument with HMRC over the pre-election period. See page 3 of HS283.
If I let my house out now does the flat automatically become my main residence from now?
Ok, I understand. Assume that my flat is accepted as my main residence from 1998 to present and I let out my house (2nd home), do I qualify for lettings relief? Does this also mean that I wouldn't get PPR on the house?
Ok, in this situation, after 1 or 2 years letting the house, I move back and live in it for a year, would I get 2.5 years PPR as well as letting relief?
Thank you so much for your advice. I will definitely use you again for all future queries.