Can anyone advise on capital gains tax?

[Myneighboursnorlax]

DH and I have finally paid off our mortgage, and we will be looking to move to a bigger property in the near future. We had planned to take out a new mortgage to buy a second house before selling ours, to avoid the stress of a chain, then selling once we’d moved and using the proceeds to pay off a large chunk of the new mortgage.

A relative has pointed out that we may have to pay capital gains tax when we sell our current property if we do this. Does anyone know if this is correct? We don’t plan to rent it out, and we’ll be moving from one main residence to another, just more slowly than a normal sale.

I’ve seen some websites say you have 9 months to sell before capital gains tax becomes relevant. What if it takes longer? Can we avoid this by keeping our current property as our “main residence” until it sells?

Thanks in advance if anyone knows the answer.

You've got 9 months after moving to sell it before you start being liable for CGT. If it takes longer then you calculate the CGT proportionately for the months you lived in it (plus the nine month grace period) against the months you didn't live in it. I am facing selling a house 10 months after I moved out of it after living there for 8 years - the tax won't be much, if anything (92 months living there, 1 month taxable), but the calculation and supporting paperwork are going to be an absolute ballache.

Be careful with nominating the new house as your main residence, as it would mean your new house is not your main residence for that time, and therefore wouldn't get the main residence relief, so you're just deferring the problem until you sell your new house.

Sorry - should read "be careful about nominating your OLD house as your main residence".

Don't forget you will pay extra stamp duty for second home. Which you could claim back if you sell your old home within a particular time period

Thank you, that’s really helpful! I didn’t realise it was worked out like that, and you only pay it for the months you aren’t living there after the 9 month grace period. That doesn’t sound quite so bad (apart from the paperwork!). That’s a really helpful point about not just deferring the problem too. I didn’t think about that…

Luckily we have realised that and taken it into consideration, but thank you for pointing it out in case we hadn’t! It’ll be a pain as an initial cost, but at least we can claim some back.

Also, you get something like £12k capital gains allowance (each if you are a couple) on your tax returns so unlikely you’d pay anything at all.

Assume you’ve also factored in early repayment fees on the second mortgage?