CGT on property

[ramanareddy]

i bought a house in birminghm in July 2002 and lived in it until sept'2003. I then had to move to Milton Keynes and tried selling my birmingham house to buy a house in milton keynes.

I could not sell the birmingham house since it needed lot of work and hence bought another house while repairing the birmingham house.

After all repairs, i sold the birmingham house in July'04.

Now in the last 6 months, i bought a 2nd house in Milton Keynes and thinking of selling it now.

When i posted a query about CGT on the Birmingham house, i was advised that if i declare that Birmingham house was my primary house then i would not pay any CGT. Can i do this now since i bought it about 32 months ago and still within 36 months duration?

Any advice or suggestion is greately appreciate.

Thanks a Lot

Ramana Reddy

[King_Maker]

You seem to have had 3 properties in the past ~ 34 months :

A = Birmingham

B = Milton Keynes (MK) 1

C = MK 2

I assume B is/was your main residence? If so, for what period(s)?

Have you occupied C? If so, for what period(s)? Obviously, it cannot be for more than ~ 6 months?

[Instinctive]

Dear Ramana,

Birmingham house was your only or main residence until September 2003. As it was your main residence as a matter of fact there is no need to nominate it as a main residence. The period between ceasing it as your main residence in September 2003 and selling it in July 2004 is automativally covered by the final 36 months exemption.

You bought a house in Milton Keynes sometime since September 2003 (date not given) and have since bought a second house in Milton Keynes during the last 6 months (again date not given) and are now thinking of selling this (2nd) house. You have not stated which house(s) have been used as your residence since buying the first house in Milton Keynes. It may be possible to nominate the 2nd house as your only or main residence if it has in fact been used as your residence, but not as main residence, since purchase. Otherwise any gains may be liable to CGT if not covered by your annual exemption.

Ramnik
ramnikrp@hotmail.com

[CDavey9501@aol.com]

You might need to be careful. The motive for buying the second property needs to be considered. If it was to make a (relatively) quick profit then you would be liable to income tax on the profit.

[ramanareddy]

Hi everyone,

Birmingham house was bought in July2002 and i lived in it unitl sept2003.

MK#1 first house was bought in Nov'03 and lived in the house since then.

MK#2 bought in Sept2004 and let it since then. However please note that when i sell this house, i am not going to make a profit of more than £10K.

Hence i need your advice or if i have to do any declarations, your services will be welcome.

Regards
Ramana Reddy

[King_Maker]

It would seem that MK#2 (or C) has never been your main residence?

If so, and the gain is £10,000 (after including the costs of sale & purchase and any capital improvements), and you have not utilised your CGT exemption, then £1500 will be the assessable amount.

Tax would be a max of £600, if you are a 40% taxpayer.

Did you make a valid nomination of your Birmingham property? If not, there is no need as it's exempt (as Ramnik said).

[Instinctive]

Birmingham property is exempt and there is no need to make any declarations or elections.

MK 1 is your current residence and continues as such. There is no need to do anything regarding this property.

MK2 will be chargeable to Capital Gains Tax on the gains after deducting purchase price, buying costs, improvements (not repairs), selling costs and annual exemption (currently £8,500). Any taxable gains will be added to your other taxable income and gains of the tax year of disposal and will be taxed according to whichever tax band it falls into. If you sell in the current tax year, tax will be due on 31 January 2007.

Ramnik