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A Question on Capital Gains

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  • A Question on Capital Gains

    Hi Guys

    Wonder if anyone can advise me, I purchased a house 2 months ago that I thought was going to be my dream home, I did some home improvements but now realise that the location is just not for me and want to move more into kent. If I decide to sell it next month and there is equity in to house will I have to pay capital gains tax. It is my only home of residency but I wasn't sure if selling before 6 months of owning will insure this?

  • #2
    Re: A Question on Capital Gains

    I'm not a tax specialist but as far as I'm aware Capital Gains Tax would not be due on a property that has been your sole main residence throughout the time that you have owned it, no matter how short or long a period that is.
    ____________________________________________
    Property for sale in Torquay

    www.thomasdobner.co.uk

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    • #3
      Re: A Question on Capital Gains

      I'm inclined to agree that if, insofar as you had a main residence, this was it, then CGT shouldn't be payable.

      More of an issue is finding a buyer able to complete quickly. Most mortgage lenders will not lend on properties owned by a seller for less than 6 months so you may have to hang onto for that long in order to attract mortgageable buyers!
      RICHARD WEBSTERwww.rwco.co.uk
      As a conveyancing solicitor I want to be helpful (England/Wales only) but can't accept liability for this.

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      • #4
        Re: A Question on Capital Gains

        CGT (Capital Gains Tax) is a charge that may become applicable if the property you describe is not your main residence. In otherwords you do not live in the property. If this is your only property it can be 'deemed' your main residence because as a rule of thumb each UK tax payer is allowed a main residence and the main residence is free from CGT. Put another way if the property you bought and did up is the one you lived in and you have no other property you will not have to worry about CGT.

        If you own multiple homes and this is one of many or this is one of two properties and you live in the other one then CGT may be applicable if during the tax year a profit attained from the property exceeds the CGT allowance (presently £10,600). If the profit is below £10,600 there is a "Chargeable Gain" but no "Taxable Gain".

        If this property is a second home where you do not reside and you sold at a profit exceeding £10,600 then there may be a tax charge.

        For example... If the property was not your main residence and was a second home and you purchased it at £500k and sold it at £600k (after selling costs) you would make a £100k profit.

        In this example the "Chargeable Gain" is £100k. The "Taxable Gain" is £100k less £10.6k = £70.4k.

        The tax would be £70.4k x 18% for basic rate tax payers in this example (i.e. £12672) or 28% for higer rate tax payers in this example (i.e. £19,712).

        The government MPs got in trouble in respect to their 'expenses' in respect to this matter as they often "declared" their main residences as the more expensive of the property they owned to avoid CGT. You may have read about it with the scandle and "second homes". If the property is your main residence you are not to worry!

        In simple terms the HMRC don't mind people making a profit from their main homes but they do not want people to make money on property from second / third / fourth .... homes without paying tax on the profit made.

        I hope this helps!

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        • #5
          Re: A Question on Capital Gains

          Hi everyone,
          I found the post very interesting. can any of you answer some more questions please on the area of capital gains tax?

          If the house is in joint names are the sellers entitled to £10600 each before tax ?
          Are bills for home improvements taken into account?
          Is a specialist solicitor needed for this type of sale?

          Thanks in advance for you help.

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          • #6
            Re: A Question on Capital Gains

            Capital gains tax doesn’t apply to main residence as far as I know
            Guaranteed Rent Scheme |Estate agents Canary Wharf

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            • #7
              Re: A Question on Capital Gains

              If this was a one off and was your only main residence (and not a 2nd home) then no taxes are due.

              If this is something you do on a regular basis - the buying, refurbing and selling of houses then under the Income tax badge of trade rules the HMRC could see it as a business for which income tax (not CGT) would be due.

              Please let me know if you need any more help or advice.

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