From: Kemph@hahooooooo.com (J Kemph)
Newsgroups: uk.finance
Subject: Re: Need input on a financial decision
Date: Thu, 25 Nov 2004 22:48:01 GMT

On Thu, 25 Nov 2004 15:54:21 GMT, Ronald Raygun
 wrote:


>>> But I'm thinking that one doesn't get taxed on the sale of one's
>>> first/primary residence. Is that correct?
>>
>>Yes, but to qualify for full relief it needs to have been your PPR
>>for virtually the entire duration of your ownership of it.
>>
>>> So what about if I sell the
>>> flat that I have been living in (my residence), and move into the
>>> second flat?
>>
>>Brilliant idea.  That should work.  At least it will put off the evil
>>hour at which the tax collector comes knocking.
>>
>>There would still be some CGT to pay when you eventually sell the
>>2nd flat, because it will then not have been your home for the whole
>>time you owned it.
>>
>>But what you said (about what that chap told you) could introduce a
>>snag.  It boils down to the original house having been only informally
>>divided, and though presumably for council tax purposes it counts as
>>two independent dwellings, for CGT purposes it doesn't (yet).  It would
>>mean that you were in effect renting out half your "own" house, so
>>if you sold either half, or indeed both halves at the same time,
>>you would get only half the PR relief.  Very roughly the implication
>>would be that instead of paying CGT now when selling the 2nd and none
>>when selling the 1st later on, or if moving, selling the 1st now and
>>paying no CGT now but paying CGT later on sale of the 2nd, the third
>>option would mean you'd pay tax for half the gain on the first sale, now,
>>and half on the second, later.  The way the numbers work out in your case,
>>it could mean you pay nothing because halving the gain before your annual
>>allowance is deducted could be enough to push the gain to below the
>>allowance threshold.

OK - I much appreciate the input on that. I have to be careful,
because if I *did* end up paying a hefty CGT demand, that, plus the
cost of selling the two flats could negate much of the profit I make
from selling the place as two flats rather than converting the place
back into a single 2-floor dwelling - particularly if property prices
fall during the time I'm getting the two flats ready to sell
separately. I'll print out what you said for careful reflection. 

Thanks again,

JK