I own a holiday home which I let out for part of the year. I want to sell it and buy a larger holiday property which I will also rent out. Will I need to pay capital gains tax on the sale?
Capital gains tax (CGT) is becoming a very complicated area of tax, which is not helped by the changes to payment of CGT, which come into force from April 6.
Currently, you have to pay CGT, when you sell a property that has increased in value and the property is not your main residential home. The tax is calculated on the gain in value of the property, not the sale price you receive. This CGT has to be paid within the financial tax year that you sell the property. This is calculated on the enhanced value of the property at exchange of contracts and not at completion.
The fact that you let your holiday home out for part of the year, and intend to buy another holiday home to rent out may be considered when calculating the CGT payable. If you are not actually taking out any cash, but rolling the funds into the buying of another holiday home, you may qualify for some CGT relief.
There is a change in CGT rules on the horizon. Next financial year CGT has to be paid within 30 days after exchange of contracts, rather than just in that financial year. This change could mean you incur penalty payments if you do not pay within the 30 days. My advice is that you seek expert and independent advice from a CGT advisor.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
