Second home/BTL issues

[Seany88]

I fear that I need a good tax adviser but thought I'd ask here first (and see if anyone can recommend someone).

So I have 3 properties, all rented out. I used to live in them but then moved on and just didn't sell them. I now want to buy another house for myself. My accountant says this will be treated as a second home so I'll have to pay the extra stamp duty. Ok no problem, I currently don't live in any of my houses but my accountant also says I can't declare any of them as my Principal Private Residence. So if I was to sell any of them to fund MY house I'd have to pay full CGT whack too. My accountant also says that if I remortgaged any of the properties then the mortgage interest would not be tax deductible. So I guess I'm stuck between a rock and a hard place, I'm going to be paying tax somewhere if I want to sell or release funds?

I guess my question is what's the best way forward? I thought I could just never sell the properties so it all wouldn't matter but life throws curve balls and you can never say never 🤷

[OutInTheShed]

You get CGT relief for the time when a property was your main home, plus IIRC a couple of years.

So if you buy a house, live in it for 2 years, rent it for 6 years, you might only pay CGT on half the 'gain'.
Then you get a cgt-free allowance of gain.

There is lots on the HMRC website.

The punitive stamp duty, you might be able to reclaim if you sell a property which used to be your main home within x-time? I don't know TBH.

[gotoPzero]

There is a calculator on hmrc somewhere,

[FriedMarsBar]

why can you not declare your new house as your PPR?

[Caddyshack]

FriedMarsBar said:

why can you not declare your new house as your PPR?

The op didn’t say that, they said can’t claim any of the 3 rented ones.

[Caddyshack]

OutInTheShed said:

You get CGT relief for the time when a property was your main home, plus IIRC a couple of years.

So if you buy a house, live in it for 2 years, rent it for 6 years, you might only pay CGT on half the 'gain'.
Then you get a cgt-free allowance of gain.

There is lots on the HMRC website.

The punitive stamp duty, you might be able to reclaim if you sell a property which used to be your main home within x-time? I don't know TBH.

It’s a bit more complicated than that.

There is a taper relief calculated.

You generally have a time period to let out the house free of CGT on sale then after that the whole gain is calculated but a relief is given iirc.

[Eric Mc]

Do you own your current main residence?

[FriedMarsBar]

Caddyshack said:

The op didn’t say that, they said can’t claim any of the 3 rented ones.

You're correct I misread that.

[Jon39]

Think it was during the 'Lib/Con pact' (possibly because the Libs liked the idea of taxing people, who are prepared to take a risk and invest their tax paid money, instead of spending it).

With CGT, you used to be able to deduct inflation from gains. Seemed sensible, because any inflationary gain is not real money, or actual profit.

The CGT inflation adjustment was disallowed.
With inflation now at a higher level, that change really makes a big and growing difference when assets have been held for sime time.

When CGT is excessively high, many transactions can be put off (zero tax paid). On past occasions, the Treasury have collected more tax revenue following a reduction in CGT rates, but that does not satisfy voters, who probably imagine all investors are stinking rich tax dodgers.

[Caddyshack]

Jon39 said:

Think it was during the 'Lib/Con pact' (possibly because the Libs liked the idea of taxing people, who are prepared to take a risk and invest their tax paid money, instead of spending it).

With CGT, you used to be able to deduct inflation from gains. Seemed sensible, because any inflationary gain is not real money, or actual profit.

The CGT inflation adjustment was disallowed.
With inflation now at a higher level, that change really makes a big and growing difference when assets have been held for sime time.

When CGT is excessively high, many transactions can be put off (zero tax paid). On past occasions, the Treasury have collected more tax revenue following a reduction in CGT rates, but that does not satisfy voters, who probably imagine all investors are stinking rich tax dodgers.

Yes, I wrote in a recent thread that if the govt. gave a 50% discount on CGT they would have a fast tax take as people would realise gains as opposed to holding until death.

[Armitage.Shanks]

Surely one of them is a PPR? For example if you live in one and decide to rent it out because you’re working overseas etc when you come back the tenant leaves and you move back in so is this not back to your main residence and free of CGT? If you sell to buy another main home?

[Caddyshack]

Armitage.Shanks said:

Surely one of them is a PPR? For example if you live in one and decide to rent it out because you’re working overseas etc when you come back the tenant leaves and you move back in so is this not back to your main residence and free of CGT? If you sell to buy another main home?

This may answer that for you:

To be in the running as the main residence, a property must be lived in as a home. This means that a property which is let out cannot be a main residence while it is let. As long as this condition is met, any property which is lived in as a home for at least some of the time can be the main residence for CGT purposes.


I was once told that a tenant can grant you their PPR if they do not have a use for it but that may be BS.

[Eric Mc]

Jon39 said:

Think it was during the 'Lib/Con pact' (possibly because the Libs liked the idea of taxing people, who are prepared to take a risk and invest their tax paid money, instead of spending it).

With CGT, you used to be able to deduct inflation from gains. Seemed sensible, because any inflationary gain is not real money, or actual profit.

The CGT inflation adjustment was disallowed.
With inflation now at a higher level, that change really makes a big and growing difference when assets have been held for sime time.

When CGT is excessively high, many transactions can be put off (zero tax paid). On past occasions, the Treasury have collected more tax revenue following a reduction in CGT rates, but that does not satisfy voters, who probably imagine all investors are stinking rich tax dodgers.

Indexation for individuals was abolished in 2008 by the Labour Chancellor, AListair Darling.

[Jon39]

Caddyshack said:

Yes, I wrote in a recent thread that if the govt. gave a 50% discount on CGT they would have a fast tax take as people would realise gains as opposed to holding until death.

Exactly, but possibly not attractive to the envy vote.

Just listen to a few callers to LBC Radio.
If the rich (never defined) paid more tax, the working man (thought most of us had to work) would be much better off and public services would become excellent.

Many of those callers, also demand a tax to be charged every year on value of everybodys home, because the values have risen too much and so the owners are therefore rolling in cash. They demand those value increases are taxed as income.
It is going to be called a wealth tax (presumably in addition to Council Tax, which is already loosly based on the value of homes).

UK Income Tax was introduced on a 'temporary' basis, in December 1798.
The rates payable were from 0.8% to 10%.

Have you followed the progress of Insurance Premium Tax ?
Introduced in 1994 at 2.5% of premiums.
Having realised this new tax is easy money and insurance customers hardly realise they are paying any tax, successive governments set about increasing the amount charged. To add confusion, two different rates were implemented.

Standard rate;
1994 = 2.5%
1997 = 4%
1999 = 5%
2011 = 6%
2015 = 9.5%
2016 = 10%
2017 = 12%

Higher rate;
1997 = 17.5%
1998 = 20%

Is that what is known as Tax Creep ?

[OutInTheShed]

There are some get-outs for people who own a home and live-away from it

https://www.gov.uk/tax-sell-home/absence-from-home


Accountants, in my experience, are often wrong.

[Eric Mc]

You don't have to live in a property for it to be classified as your Main Residence.

If you have two or more possible Main Residences, then you can make an election to pick whichever property you WANT to be your Main Residence. This was the tax option that was being exploited by some MPs in the "home flipping" scandal of a decade ago.

Generally, your Main Residence is the property in which you are actually living. However, there may be circumstances where you can get Main Residence for a property your aren't actually living in. For instance, if you buy a property with the INTENTION of it being your Main Residence but cicrcumstances mean you are unable to live there (e.g. - your job posts you away from the area or overseas).

[Seany88]

Eric Mc said:

Do you own your current main residence?

I've been living in a motorhome for the past 4 years! And yes due to travel, and work I haven't been able to live in any of the properties for some time, so can PPR be retrospectively declared?

Edited by Seany88 on Monday 31st October 22:37

[Seany88]

OutInTheShed said:

There are some get-outs for people who own a home and live-away from it

https://www.gov.uk/tax-sell-home/absence-from-home


Accountants, in my experience, are often wrong.

Good link, thanks. So if I read that correctly I get the first 2 years relief then the last 9 months which makes things a bit better.

It mentions that I can nominate a home even if I was away for up 3 years as long as I move back in, but is that with the caveat that it cannot have been rented out in that time?

What are the chances that the tax rules on buy to let's and capital gains might change in the next 5 years or so? 😂

[Eric Mc]

CGT rules change quite often - rarely to the advantage of the tax payer.