Tax question main residence

[Bunting2010]

Hi Odd question hopefully someone can help.

My main residence. I have been living in for the last 7 years.

Im building a small house on the side garden plot. Im told I wont pay any on the new build as its been my main residence for a number of years.

Im going to split the deed before the house is built. So the new house has it own title, my mortgage company are happy for me to split the garden plot.
My reason for splitting the plot is to get finance on the plot, as it will have zero borrowings against it.

My question if I spilt the deeds will it affect my tax position. Im likely to turn both houses into buy to lets in the future.

Thanks

[Eric Mc]

Bunting2010 said:

Im building a small house on the side garden plot. Im told I wont pay any on the new build as its been my main residence for a number of years.

I

You need to clarify your question. What do you mean when you say, "I'm told I wont pay any on the new build"?

Are you talking tax?
If so, what particular tax?

[Stay in Bed Instead]

Are you sure you can create a new Title for yourself from within one you already own?

I have previously been told by a solicitor that you can't.

[Eric Mc]

The OP needs to clarify his questions a bit.

Essentially, a person can only have one property classified as their Main Residence at any one time. If they have more than one property, the one they live in will always be, prima facie, assumed to be their Main Residence. If they want, they can elect to have one of their other properties classified as the Main Residence instead. This is the kind of "switching" that MPs were found to be doing.

If you have hived off land from the plot on which your Main Residence stood and have built a second property on that plot, automatically, that plot and the building on it cannot be a Main Residence unless you are eligible to make an election to do so. But, of course, if you make that election, the former Main Residence stops being a Main Residence from that date.

Ignoring any elections to switch Main Residence, if you sell that second property, then the sale will be subject to Capital Gains Tax.

[Simpo Two]

Eric Mc said:

Ignoring any elections to switch Main Residence, if you sell that second property, then the sale will be subject to Capital Gains Tax.

What would be the starting value though? The price it cost to build, the land or both?

[Eric Mc]

Good point.

You would most likely use an apportioned cost based on the original cost of the Main Residence and its surrounding plot.

Don't forget, that if the land on which a Main Residence is greater than 5,000 square meters, then the extra land is outside of the Main Residence exemption.

Per HMRC -

You do not 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 have not let part of it out - this does not include having a lodger

you have not 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 did not buy it just to make a gain

[Cheib]

Bunting2010 said:

Hi Odd question hopefully someone can help.

My main residence. I have been living in for the last 7 years.

Im building a small house on the side garden plot. Im told I wont pay any on the new build as its been my main residence for a number of years.

Im going to split the deed before the house is built. So the new house has it own title, my mortgage company are happy for me to split the garden plot.
My reason for splitting the plot is to get finance on the plot, as it will have zero borrowings against it.

My question if I spilt the deeds will it affect my tax position. Im likely to turn both houses into buy to lets in the future.

Thanks

As per what Eric Mc says it depends on the size of your plot/house.

I think you are asking about CGT on your second in which case you only need to worry about it if you ever sold it. The only possible “tax” I can think of which would be levied on your new build is CIL - Community Infrastructure Levy which is a lump sum which has to be paid to the local council when they give planing for a new property, in my area I think it’s currently £50k.

Your Prime Residence Tax relied is not affected assuming you stay living in the original house.

[Bunting2010]

thanks all for helping. Very useful info!