How capital gains tax affects you if you own more than one home

Unlike when you sell your main home, if you own more than one property, any profit made when selling those that aren’t your main residence will attract capital gains tax.

As part of the Treasury’s 2013 review into capital gains tax (CGT) main residence relief, it was proposed that a person’s right to elect which of their two or more residences should be their main residence for CGT purposes should be abolished. Instead, the decision on which property should gain private residence tax relief would have become a fact-based assessment.

This would have caused uncertainty prior to certain property sales, with those selling not knowing whether or not they would face a tax liability, and whether they would need to retain sale proceeds to cover this.

The Treasury has now published new plans which will continue to allow individuals to make that election.

The right to make an election is a useful tax-planning tool giving you certainty in relation to your financial affairs.

However, for those resident in the UK for tax purposes, election rights may have changed.

Previously, an individual may have chosen to elect for an overseas property to be his or her main residence for various reasons, for instance, if it has a higher value than their UK home or if they anticipate selling the overseas property during their lifetime and staying in their UK home for life.

Under the proposed new rules, the right to make an election is maintained, but may be restricted to properties in the UK and to properties abroad where the individual has spent at least 90 midnights during the tax year. The individual will need to retain evidence of nights spent in their overseas home for the election to be valid.

Nick Palmer is a lawyer at Barker Gotelee, Solicitors in Ipswich. Solicitors Ipswich Suffolk – for more information on our range of legal services, please contact us on 01473 611211.