Capital gains tax

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If someone sells up their main family home and moves into their holiday home on retirement, which then becomes their sole residence, is there any tax to pay?

In short no, not if it's been your main residence the whole time

Thank you. Does this impact on the potential future sale of the current holiday home/now becoming full-time residence, in the event of say infirmity meaning it has to be sold due to going into a care home?

No but presumably the first sale would generate capital which might.

There is a main residence of nearly 40yrs plus a holiday home of 2yrs.

The plan is that they sell the main residence, and the holiday home then becomes their only, and main, residence. The money released would be used to live off during retirement.

Presumably at some point (hopefully not for at least ten years or more) it is likely that one partner will die, and the survivor may need to go into supportive care. This means the home will need to be sold. Hope that makes sense!

There will be no CGT relating to the sale of the main home.

What they will need to do is get valuations for the holiday home at the time they move into it permanently. Then down the line they would calculate the capital gain between the time they bought the home and the time they made it their permanent residence.

I don't think it is sold while second partner is living there. They would need to use savings first anyway.

I think I get it Alfie190, thanks very much :-)

So if they bought in 2016, it became permanent base in 2020, then the tax is due on that four year (potential) increase in value when it was a holiday home only? Any gain after that isn't capital gains?

If they live in it as their primary residence for a period of time (was 3 years but check as it may have changed) then no CGT is due. There are also annual allowances which can be offset.

Thank you LIZS

I don't think LIZS is correct - living in the 2nd property for over three years won't remove the CGT liability for the two years it wasn't the main residence. Also, the CGT will be calculated on the difference between the price the property was bought for and the price it is eventually sold for and not its value at the point it became the main residence - at least that's what I have been advised- if @Alfie190 has a link on this I'd be interested to see please as the advice given to me could be wrong!

Please take proper professional advice. Most accountants should be able to advise you on this. There is some misinformation on this thread and you should have things set out properly for you so you understand how the rules work.

What they will need to do is get valuations for the holiday home at the time they move into it permanently. Then down the line they would calculate the capital gain between the time they bought the home and the time they made it their permanent residence.

That's not the way it works. CGT is based on the "profit" over the entire period of ownership, which is then time pro-rata'd for main residence relief and lettings relief etc. It's certainly not based on the difference between it's value when you move in! I'd second getting proper advice from an accountant.

When you bought the holiday home, did you nominate your normal dwelling as your main residence with HMRC? No reason why you cannot also nominate the holiday home as your new main residence after you move in permanently.

There is a two year window on the main residence nomination by the way.

There is a two year window on the main residence nomination by the way.

Related to the date of sale of your previous home, not the date you move in to the second home. If you didn't make a formal main residence election when you first bought the second home, you need a "trigger" point to make it later which is usually the sale/purchase of a property, but may also be the letting out of your previous home, whereupon your main residence becomes a matter of fact, i.e. it is then your own home.