tax on selling a home?

AshleyC

AshleyC

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Ok i moved into this house in Jan and come to realise that while its a nice house its too far away from work, hate the commute and reliance on trains, and its too far away from the other half so i will be putting it back on the market once i've done it up to a reasonable standard. I was just wondering about paying tax on it if HMRC thought i was just doing the buying/selling thing. Just looking on their website they say this...

You don’t pay Capital Gains Tax when you sell (or ‘dispose of’) your home if all of the following apply:
  • you have one home and you’ve lived in it as your main home for all the time you’ve owned it
  • you haven’t let part of it out - this doesn’t include having a single lodger
  • you haven’t used part of it for business only
  • the grounds, including all buildings, are less than 5,000 square metres (just over an acre) in total
  • you didn’t buy it just to make a gain

Now that's all fine and i meet all the criteria, except the very wooly last one. How do you prove one way or the other that you didn't buy it to make a gain. What if i buy the next house and not really happy with that one either after a reasonably short period of time. Its still my home, im living in it, but its bound to go up in value once its been tidied up. I'm really not interested in buying houses, doing them up and selling them on. This one has proved to me i really don't see a career in that! far too much effort, although i can see there is good money to be made. But would i likely get hit for a tax bill based on the last point there.
 
You're not buying it 'to make a gain' though are you?

You're living in it and circumstances dictate that you need to move.

Nothing wrong with that and if you make a gain, well done and nothing to tell HMRC about I shouldn't have thought.
 
If it’s your only house no tax on selling it. Just stamp duty on your new one
 
I think the last criterion, about not buying the property just to make a gain, is there to prevent tax avoidance.

For example, suppose I've got a second property which I want to sell, but the market price is such that I would incur CGT. I agree to sell it to you at a reduced price so that there is no CGT, and in return you sell or give me something which won't give me a tax liability. You live in the property for a bit as your only residence, then you sell it, and as it was your only residence there's no CGT to pay. So between us we've avoided the tax - and that last provision is there to prevent schemes like this.

I'm sure you'll be fine. (But I am not a tax specialist.)
 
The last criterion is probably a pretty new one (they changed rules on making money out of house purchases a budget or 2 ago - it's largely to inject FUD into the rental market :) ).

The short answer is that if you only own one house and used it solely to live in all the time you own it (or at least never let it out) then under current regulations there's no CGT to pay.
 
I think you're overthinking this and worrying about nothing :)

StewartR said:
I think the last criterion, about not buying the property just to make a gain, is there to prevent tax avoidance.
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Exactly this.
It's deliberately vague to try to close down loopholes where people were messing about with residences in order to avoid CGT, not to penalise people who genuinely need to move on after a short period of time.

If it's really worrying you though, why not give them a call?
They're human beings, not monsters - and I know first hand that there are actually some really nice and helpful people there who will put your mind at ease.
 
SarahLee said:
If it's really worrying you though, why not give them a call?
They're human beings, not monsters - and I know first hand that there are actually some really nice and helpful people there who will put your mind at ease.
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Maybe so. But what one HMRC employee says on a phone conversation today can't really be relied on 10 years down the line.

If you want a solid answer, I'd start here - https://www.taxcafe.co.uk/property-tax.html

But yeah, I wouldn't worry.
 
JonathanRyan said:
Maybe so. But what one HMRC employee says on a phone conversation today can't really be relied on 10 years down the line.
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But we're really not talking about 10 years down the line.
If I read the OP correctly, he'll be selling up and moving out in the next couple of months.

JonathanRyan said:
If you want a solid answer, I'd start here - https://www.taxcafe.co.uk/property-tax.html
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That seems to be aimed at property investors and landlords - I'm not sure that it's going to be much help to Ashley's scenario, unless there's something else on that page that I'm missing???

JonathanRyan said:
But yeah, I wouldn't worry.
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Agreed. It's his primary (only?) residence and he meets all of the criteria for exemption from CGT.
His only worry is that HMRC might interpret the last clause to catch him out - which they won't :)
 
SarahLee said:
But we're really not talking about 10 years down the line.
If I read the OP correctly, he'll be selling up and moving out in the next couple of months.
Click to expand...

Nevertheless, I know people who have called HMRC, got advice, followed it and found that the advice wasn't actually correct. It really doesn't matter if it's 10 years or 10 days if you can't prove what they said and that they were speaking on behalf of HMRC.

That seems to be aimed at property investors and landlords - I'm not sure that it's going to be much help to Ashley's scenario, unless there's something else on that page that I'm missing???
Click to expand...

It would be overkill because I'm sure Ashley doesn't need to worry about it, but some of those books have detailed worked examples of CGT and advice on a "statement of intent" which apparently HMRC are currently accepting as proof of your purpose in buying a property. There are also a few hilarious rants at how unfair the recent tax changes (such as basing tax on what they think was in your head at one point in time) are.

The point is that if you are buying a property "with the intention of making profit" then you are a property investor. So if Ashley were to be liable to CGT then he would be the kind of person those books are aimed at.
 
thank for the replies peeps. I would of just called them but only thought about it last evening out of office hours :) Although saying all that, the next house would again be something that needed a little work where i could improve on its sale price, so while it would still be my only home there would be a profit to be made if i sold up early again. They see your name going on the land registry a couple times a year and they might assume you're making a living off it.
 
thank for the replies peeps. I would of just called them but only thought about it last evening out of office hours :) Although saying all that, the next house would again be something that needed a little work where i could improve on its sale price, so while it would still be my only home there would be a profit to be made if i sold up early again. They see your name going on the land registry a couple times a year and they might assume you're making a living off it.
 
If you are a bit concerned keep a record of the costs of all the improvements, including the hours you spend. That will show that you did not buy it just to make a quick profit
 
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