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bigduckontax
bigduckontax, Accountant
Category: Tax
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I have two properties. One of which I have had for 5 years

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i have two properties. One of which I have had for 5 years and a crash pad which I recently bought in London approx 7 months ago for work purposes. I use both these residences and neither are rented out although the London property is on a btl mortgage. If I was to choose to sell one of these properties in 5 years time would I be liable for some crazy thieving tax? or would it just be the standard selling fees etc.

Hello, I am one of the experts on Just Answer and pleased to be able to help you with your question.

When you acquired your crash pad did you elect as to which of your residences Private Residence Relief (PRR) would apply?

Customer: replied 6 months ago.
i don't think so.
Customer: replied 6 months ago.
oh and sorry the BTL mortgage is on the property I have had for 5 years. mortgage on the crash pad
Customer: replied 6 months ago.
residential mortgage on the crash pad

Your Capital Gains Tax (CGT) liability will be decided by HMRC on the facts and will inevitably be the original one which is entitled to PRR. On sale there would be CGT due, but PRR is at 100% so there will be no tax. When you sell the pad though CGT will apply. You have 2 years from the change in property mix to make the election so it is a question of which residence is likely to make the most gain on disposal. Mortgages are irrelevant in CGT computations.

I do hope that you have found my reply of assistance.

Customer: replied 6 months ago.
Thanks. So just to clarify you don't pay CGT on your primary residence? but you do on the non primary residence? and you have assumed that most likely my first purchase 5 years ago will be classed as my prr and thus no cgt will be liable on this property. however cgt will be liable on the "crash pad"?if the above is true how do I check / confirm my prr with HMRC? also what is the CGT rate?

You do not need to, the selection will happen automatically on the facts. You pay CGT on all gains made from the sale of landed property, but if it is your sole or main domestic residence then PRR applies. CGT is charged at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale. You have a non cumulative Annual Exempt Amount (AEA) of 11.3K to offset this gain, 11.7K next tax year.

Please be so kind as to rate me before you leave the Just Answer site.

Customer: replied 6 months ago.
Thanks. So before I rate two more clarifications please....1) When I asked about selecting which property I want for PRR you said "You do not need to, the selection will happen automatically on the facts". However your first message to me said "When you acquired your crash pad did you elect as to which of your residences Private Residence Relief (PRR) would apply? ". This suggests I can elect/ select a property for PRR?2) If the crash pad was bought for lets say 350k and needed to be refurbished and I spent 50k on a mixture of cosmetic work (kitchen/ bathroom etc) and structural work/an extention. I then sold the property for lets say 450k. is the CGT calculated on my outlay of 350k or my outlay 400k?thanks
Customer: replied 6 months ago.
sorry one last q before I rate....3) when I bought crash pad i paid the inflated stamp duty rate as it was a "second home". if i sell crash pad in 3 years with the said rennovations do i get this stamp duty back?thanks big duck!

1) You can select within 2 years of any property mix change.

2) 400K.

3) You can apply to the Stamp Office for a refund of the surcharge.

Customer: replied 6 months ago.
in regards ***** ***** one i can select one of my two properties that i currently have as my PRR as it has been less than 2 years since the change in property mix? sorry im just a bit confused.clear on the other two points.

Correct, but of course it all depends on the possible gain on each property. It's a finger to the wind job!

Customer: replied 6 months ago.
how do I select? Like do I need to notify hmrc? I want my prr property to be my original property not the crash pad.

You can rest assured that that will happen automatically. You could elect if you wish, belt and braces!

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