Do I have to pay CGT on my holiday home?

18 March 2013

Q

We live in a rented house in Shropshire because I worked in the Midlands until March 2012. In 1999, we bought a cottage in Wales, which we intended to live in at some point. We have been renting it out as a holiday cottage for about 20 weeks of the year to help pay our rent in Shropshire. We paid income tax on the tiny profit from the holiday letting. We now want to sell up and buy a home in Shropshire. Would we have to pay capital gains on the property we own in Wales? Could you advise please? We are both now retired and I pay tax at the basic rate.
From
CR/Telford

A

When selling your own home there is never capital gains tax (CGT) to pay, as long as it has been your main residence throughout.

The problem here is the property has never been your main residence and therefore you could find that there is a liability, depending on how much the property has appreciated in value.

Those who own two homes as residences can choose to elect the property that is their main residence. However, in this case it does not appear the Welsh property has ever been your actual main residence.

That said, there are personal allowances and other reliefs that could help mitigate any CGT liability on the sale of property.

With any tax matter, I would suggest you contact HMRC or an accountant for advice on the specifics of your situation so you can assess the extent of any potential liability properly and how best to limit that.