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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15977
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I wonder if you can help me with some advice on CGT on the

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I wonder if you can help me with some advice on CGT on the two houses we currently own.
We have lived in our current house since 1978. Last May(27th) we bought a house which needed extensive renovation. We have been working on it since and were hoping to finally move in early next month. At the same time, we put our current house on the market in February and immediately found a buyer. All was going well on this sale until a couple of days ago when a boundary problem emerged. It is likely that this is going to take several months to resolve and it appears that our purchaser is going to pull out. In addition to giving us a short-term cash-flow problem, it will also mean that the period when we have two houses will stretch well beyond one year, throwing up the issue of CGT on one of them. It is on this point that I'd appreciate your advice.
If we decided to finish off our new house and move in in the next month or so would this mean that our current house would become our second home and therefore liable to CGT? And if so when would the HMRC start to calculate the CGT from? Alternatively, we could decide to moth-ball our new house (leaving it still uninhabitable due to no connected water or drainage - hence why it is still registered with our local council as an 'uninhabitable property' for Council Tax purposes) and continue to live in our current house until we've resolved the boundary problem. But would this give us CGT problems on our new house?
Your advice would be really appreciated.
Thank You, *****

Leave this with me while I draft my answer. I just have a couple of points to check.
Hi again

Take a look at HS283 here for information on the main home and CGT.

First off, CGT was rebased to 31 March 1982. The value of your first property at that time will be your cost for CGT purposes.

Assuming that the first property will have been your main home for the entire period of ownership or for all but the last 18 months of ownership, you will have no CGT to pay on the gain. If you moved into your new property at the end of April, you would have until October 2016 to sell it completely tax free.

If, for example, you sold the first property 30 months after moving out, then only 12 months worth of the gain which is deemed to have accrued evenly since 31 March 1982 will be taxable. That's a small proportion. Assuming the property is jointly owned, you will each be entitled to exemption from CGT for the first £11,100 (current rate) of gains you each make in any one tax year.

Normally, you have one year from the date you buy a property to make it habitable, move in and have the first year treated as exempt from CGT as if you had moved in on day one. Sometimes, in extreme cases, HMRC will allow another 12 months.

You have two years to make an election for one of the properties to be treated as your main home to avoid the matter being determined by the facts.

I'd be inclined to move into the new home and try to sell the first one within 18 months.

I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.

Tony, many thanks for this. I've just one follow up question. lf we move out of our current house in the next month and then let it whilst we tried to resolve the boundary problem and sell it would we still get the 18 month period of grace before we might have to start paying cgt on it? Obviously we'd have income tax to pay onthe rental income but what about cgt in this instance?


Mike Crouch

You would still get the 18 month period of grace. After that, you'd qualify for letting relief which you can read about in HS283.
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