Capital Gains Tax on second home

You only have to pay tax on the gain not the proceeds. What was the value when you aquired it? You can laso deduct taper relief and your personal CGT exemption for the year. No way round it really.

It's shot up really in six years we got it for 35k. So I will have to pay 40% of 45k so 18k? Could I not put it in my mums name and then sell it as she has been resident in it for the last 6 years? I think I know that if I put it in my wifes name then she will be liable for the CGT, would the same apply to my mum even though it has been her residence? What is the personal CGT exemption for a year? I have been scouring the IR web site recently and can't see anything about that. Sorry to go on but all I seem to do is pay taxes so any way to reduce them is all good. Thanks for any insights.

"John Smith" wrote

He'd better hope that the IR doesn't catch him. Tax "avoidance" is OK but what you have outlined here is tax *evasion* - ie illegal!! :-((

Mortgages normally are not relevant to CGT. The sale proceeds going to the mortgage company would not lessen his CGT liability.

Thom

I believe the CGT allowance is about 8k. If you put it into joint names with your wife, you can claim both allowances when you sell it, which will almost equal your tax liability.

John

The CGT exemption for individuals for 2004-05 is 8200.

The gain arises when it changes hands so you can't do that.

I think I know that if I put it

I have been scouring the IR web

Take a look here where you will find most of the answers you want.

In message , John Smith writes

This is completely wrong.

If you have two homes and have lived in both, you can nominate which one is counted as your home for CGT purposes. Decide which house has increased its value most, nominate that and pay CGT when you sell the other house. Details on the Inland Revenue site.

It's not as simple as that, because you can't always do it retrospectively, and certainly not 6 years after the event.

It's not as simple as that, especially because once you know what the respective gains are, it'll likely be too late to make a nomination.

Of course once you've sold the nominated one, the other will then revert to being your main home, so any CGT on that will be limited.

In message , dp writes

What are the so-called 'taper reliefs' in connection with selling a second home please?

Simply put, you get a 5% discount off the gain for each year for which you've owned the asset being disposed of (this applies not just to houses, but to any asset which has sustained a capital gain, such as shares).

The fine print limits this in several ways:

The clock starts on 6th April 1998 (because before that you got Indexation Allowance *instead of* Taper Relief - but if you owned the asset before then, and sold after then, you get a mix, IA from acquisition (it gets more complicated if this was before March 1982) to 1998 and TR thereafter).

The first two years don't count, so were you to sell now an asset acquired in or after April 1998, the maximum number of whole years that could have elapsed is six, so the maximum discount you counld get is 20%.

But you get a "bonus" year if you owned the asset prior to the date the new rules were announced (on the th of March 1998), so you could in fact get a 25% discount in the above example if you owned it before then.

The maximum discount is 40%, which cannot apply before April 2008 (or

Part-years don't count.

The discount applies not to the value of the asset but to the gain after all other reliefs have been applied, but before the annual exemption has been deducted.

(Snip a concise and much-appreciated explanation)

Many thanks indeed for taking the trouble with such a lucid explanation.

Hi having had lots of excellent responses and pointers as to where to read up on things I can probably answer this. Taper Relief basically means the longer you own a property the less CGT you have to pay. Example is in my case a property owned for 6 years will get 20% of the profit from sale excempt from CGT. So only pay CGT on 80% of the profit. See this document