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bigduckontax, Accountant
Category: Tax
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I have owned my home since 1976 and lived in it continuously

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I have owned my home since 1976 and lived in it continuously for nearly forty years. I recently inherited a house which I now want to make my main home. I intend to retain my original home for at least two years as a second home for personal and occasional family use. If after two years I decide to sell my original main home, then I shall be liable for Capital Gains tax. How will this be calculated? Will there be any exemptions?
Hello Nia, I am Keith, on of the experts on Just Answer, and pleased to be able to help you with your question. You will be liable for Capital Gains Tax (CGT) on the disposal of one of your houses. You can advise HMRC which house you elect Private Residence Relief (PRR) to apply. It is pretty obvious that this will be your existing residence. You have two years from acquisition of the second to write to your tax office with this election. When you eventually sell though for the last 18 months of ownership you are deemed to be in residence even if this is not the case. So supposing you sold both houses in two years time and have elected for your original house to receive PRR, which relieves CGT at 100%, then only 6/24 = 25% of the gain on the second will be exposed to CGT. The tax is calculated on the gain which would be the net selling price less the probate value at 25% of the gain. You have an Annual Exempt Amount (AEA) of 11.1K to offset this gain and anything over will be taxed at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale. I hope you now see the principle. I appreciate that you are going to keep your inherited house so when you sell the original there will be no CGT to pay. Your second house will be liable to CGT, but once you have sold the first it will become your sole or main domestic residence and attract PRR. The proportion of the dual ownership you will appreciate will become smaller as time passes and with luck should pale into insignificance in the longer term. I do hope that I have shed some light on your position.
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I got as request from you for a phone call, but the system lost it immediately. As I am answering your question from Thailand perhaps that was a good thing!