Capital Gains Tax: how do I make my second home my main residence and what are the tax consequences?
My personal circumstances have changed and I now spend nearly all my time in London and so I would like to make my London house my main residence.
How do I do that and what are the tax consequences?
Answer: There is a Capital Gains Tax exemption on any capital gain that arises when you sell a property which has been your main or principal private residence.
For the property to qualify for full exemption you must have occupied it for the whole period of ownership.
You could elect to nominate your London home as your main residence by notifying HM Revenue and Customs (HMRC) in writing.
The election should be made within two years of a change or mix in properties and so your election should be made within two years of the date you acquired your London home.
If you do not make an election or your election is made more than two years after you acquired the London property, HMRC would treat it as a question of fact as to which property is your main residence.
If your London property is your main residence, a Capital Gains Tax liability would arise on any gain you make on sale of your country property, but as it was your only or main residence for a while, a proportion of the gain would be exempt from Capital Gains Tax and currently any gain made in the last 18 months of your ownership of it would be exempt.
The rules are complex so do seek specialist tax advice.
These answers can only be a very brief commentary on the issues raised and should not be relied on as legal advice. No liability is accepted for such reliance. If you have similar issues, you should obtain advice from a solicitor.
If you have a question for Fiona McNulty, please email legalsolutions@standard.co.uk or write to Legal Solutions, Homes & Property, Evening Standard, 2 Derry Street, W8 5EE. Questions cannot be answered individually, but we will try to feature them here. Fiona McNulty is a solicitor specialising in residential property.
