Pound coins. Capital Gains Tax: Don't Get Stung

Property Development Capital Gains Tax: Don't Get Stung

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Date Published:
06/06/2008

No, we're not talking about tax evasion here, just some careful planning! The easiest way to avoid capital gains tax is by taking advantage of the main residence exemption and moving into the property for a short time.

Georgian House. Capital Gains Tax: Don't Get Stung

If, for example, you live in it for a few months, declaring it as your main residence, CGT would not be payable, even if you then rent it out for three years before selling. This is because the final three years of ownership are treated as part of the main residence exemption.

Another point worth mentioning is that married couples and civil partners are only allowed one main residence between them. If you're unmarried, you get one each - so you can declare one property each as your main residence.

Green and red toy houses Capital Gains Tax: Don't Get Stung

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To find out whether you can take advantage of the various exemptions relating to CGT, it's worth speaking to an accountant. Yes, it will cost you, but for the advice a good accountant can give you, and the potential amount he could save you in tax, you could easily save more than the fee.

For the most up-to-date advice and further information, contact your local tax office or visit the HMRC website.

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The views represented in this article are those of the author and not of Channel 4. The purpose of the article is to provide general information only and does not constitute financial, investment, legal or other advice.You should not rely on any information provided in this article and you should always seek out independent professional advice relevant to your own particular circumstances.

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  1. To respond to Paul's comment, the gain is not tapered but on the basis of the facts as presented most of the gain will be relieved. The house and garden/grounds up to 1.24 acres will be wholly exempt from CGT if it has always been the only or main residence. The additional 0.25 acres of garden land MAY be exempt if an area larger than 1.24 acres (0.5Ha) is required for the reasonable enjoyment of the dwellinghouse as a residence. If not, then the 0.25 acre area will be subject to CGT. The 7 acre field will be subject to CGT regardless.
    Posted by Mike on 25/08/2009 12:04:10
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  2. Your website, and the relevant tax websites state that people are liable to pay property tax if their garden and area of grounds sold with the house exceeds 5,000 square metres, which is about one and a quarter acres. This includes the site of the actual house itself. My parents own a house, with a barn next to it, and a garden with a tennis court in it; this covers about about 1 acre and and half. Adjoining this they own a field which is about 7 acres in size. This field is classed as agricultural land - and is actually not used for any particular purpose. It just lies fallow - and every so often the grass has to be cut by a hired tractor driver. My question is this: Why on earth should my parents be liable for Capital Gains Tax ON ALL THEIR PROPERTY - i.e. their house and garden, in addition to the field - when somenone who had just one a quarter acres is not liable for anything? Is it not totally iniquitous that just because they have a garden slightly larger than one and a quarter acres - and a further 7 acres of field - that they have to pay an 18% tax on their ENTIRE PROPERTY when the person who owns the one and quarter acres pays nothing at all? I am completely flabbergadsted; can you help me and explain this to me please? Is it not tapered so as to be not so utterly unfair? Paul
    Posted by Paul on 29/01/2009 23:00:06
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  3. Emma Jones' capital gains advice is misleading. Living in a house for a couple of months won't necessarily gain private residence relief. It isn't just living there that matters - it is the quality of occupation. If someone moves into a house knowing that it will only be for a few months, then relief is unlikely to be due. This is based on a tax case, Goodwin v Curtis.
    Posted by Mike on 03/10/2008 21:25:46
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  4. If i build an office/study extension on my house and claim the costs for building through my business I can recalim the vat. But what CGT will I be liable for when I sell the house. Is there anyway I can avoid CGT if I stop using the extension as an office for the business for a period of time before I sell the house?
    Posted by david whan on 26/09/2008 10:00:01
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