Purchase new house before sale of existing

[yecat]

Hi,

We have found a house that we are interested in buying. The vendors are looking for a quick sale and have already turned down an offer from a potential buyer which was subject to sale of their existing house.

We have finance to cover the cost of buying this house without having to wait to sell our existing house. The plan is then to place our house on the market immediately.

I am just wondering if we are at risk of having to pay capital gains tax on our existing house if it is no longer our primary residence?

thanks!

 

[Dreamerb]

I am just wondering if we are at risk of having to pay capital gains tax on our existing house if it is no longer our primary residence?

Only if (1) you can't sell your current house within a year (there's a year's grace period allowed for selling, and / or (2) you rent out current house between moving out and closing a sale on it.

 

[silvamuppet]

Dreamerb, correct me if I am wrong. But with regard to point 2 the capital gains would only apply for the period from when they started renting to when they sold it it.

i.e the capital gains would only be taxable on a small enough amount (unless there was an enormous rise in the price of the property over that small time).

I wonder if the price actually went down over that period could you generate a tax loss to offset against capital gains tax accrued elsewhere??? (just thinking out loud there )

 

[Dreamerb]

Dreamerb, correct me if I am wrong. But with regard to point 2 the capital gains would only apply for the period from when they started renting to when they sold it it.

That is correct. The CGT liability would be calculated as
[Capital Appreciation * B] / [A + B]
where B = time for which it's rented, and A is time for which it's a PPR. I'm not absolutely clear on whether the twelve month additional exemption may be applied when the property is rented for a time, but I think it may be.

Of course, other factors to take into account if deciding to rent are any liability for stamp duty clawback, plus the hassle of being a [tax and regulation compliant] landlord.

i.e the capital gains would only be taxable on a small enough amount (unless there was an enormous rise in the price of the property over that small time).

Not exactly - any appreciation is apportioned over the period of ownership, so "when" the appreciation happens isn't really relevant. It's all on realised values.

I wonder if the price actually went down over that period could you generate a tax loss to offset against capital gains tax accrued elsewhere??? (just thinking out loud there )

Again, because it's realised values, the timing isn't relevant, and unless the OP bought very recently indeed it seems an unlikely eventuality. But that's just the preliminary to my real answer, which is that I haven't a clue about the off-setting rules!

 

[Oracle24]

Anyone got a rough idea on how expensive bridging is these days? Am facing the slight possibilty of having to get bridging of 1M for a couple of months so wondering roughly how much the monthly payments would be...


Thanks

 

[Dreamerb]

I got bridging just under six months ago, at home-loan rates (ca. 4.4% at the time, I think - wouldn't have been the best home-loan rate on the market, but definitely reasonable). If you're getting bridging with the same lender as your new mortgage, you may be able to get them to waive the arrangement fee as well.