Neil Askew, March 2015
Napoleon famously called Britain a nation of shopkeepers, but it looks like we’re now becoming a nation of private landlords. It’s certainly happening with a number of my clients in the Coventry and Warwickshire area.
One of the main questions I often get asked about is capital gains tax (CGT) on second homes. So I just want to put some clarity around this subject.
Capital gains tax is payable when you’ve made a profit on something you’ve sold. But if you follow the rules, there are plenty of ways to cut down your CGT bill.
Most people who live in more than one home concurrently know they can nominate one of those homes to be their “main residence”, and are therefore free of capital gains tax for the period covered by that nomination.
If you use more than one home, you can nominate which will be tax-free. It doesn’t have to be the one where you live most of the time. Generally, it makes sense to nominate the one expected to make the largest gain. You have two years from when you get a new home to make the nomination.
If you have let part or all of your home, when you sell it, a proportion of any gain will relate to the letting and could be taxable.
However, provided the home genuinely has been your main home at some time, you can claim tax relief for the time it was your main residence, plus the last 18 months of ownership.
From 6 April 2015 you will only be able to nominate a home as your main residence if:
• it is located in the same country in which you are resident for tax purposes; or
• you spend at least 90 midnights in the property in the tax year (or 90 days spread across all the properties you own in the country where the property is located).
If you are tax-resident in the UK but you want to nominate a property located in a country where you are not tax resident, you will have to meet the 90-day requirement for that overseas property. This condition will override any main residence nomination you have already made for that home.
Also from 6 April 2015 people who live outside the UK will have to pay CGT on gains they make on selling homes located in the UK. This will only apply to the gain accruing from 6 April 2015, but it could catch out British ex-pats who have retired aboard but who keep a home in the UK.
At Askews Accountants we can help you review which properties you can shelter from CGT, and those which you may want to sell. Why not call or email me to find out more about CGT and to let us help you make the right decisions.
Contact Neil for more details. Click Here