CGT - Selling Second House

K

kilbird

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I need some advice re Capital Gains Tax.

I am currently living in a 3 bed semi and it is our (me, hubbie and 2 kids) primary residence. We are renovating an old house that used to belong to my grandmother (have sorted out the tax in relation to transferring the deeds of that from my dads name to our name). We had our 3 bed on the market and were hoping to have it sold for when we were moving into the renovated house but no luck in that department. This was with the thinking that selling our primary residence we wouldn't have to pay capital gains. Now as we ahven't been able to sell the house we will have to rent it, move into the newly renovted house, try and sell the 3 bed next year and just rent it in the mean time.. I have a few questions:

(1) If we rent the house and sell it next year, we will have to pay CGT? At what rate?

(2) We are currently claiming mortgage interest relief on the 3 bed semi - what happens when we are drawing down the full mortage on the removated house - can we claim mortage interest relief on both or just on the larger mortgage?

Any advice would be appreciated?

Thanks
 
Yes you will be liable to CGT on a portion of the gain if you rent the property out and then subsequently sell it. CGT in Ireland is taxed @ 20%. When calculating the CGT on the house you will only pay CGT on the portion that relates to the period of time that the house was not your PPR. (i.e. one year over the total number of years)

Easiest thing to do about the TRS is to have two seperate loans, one of the rented house and one for the renovated house. Yes you will be entitled to TRS on the mortgage relating to the renovated house once it is your PPR.

You might consider the Rent-A-Room scheme if you think you can offload the property in the next 12 months.

Also if you are intending to pay any loans off don't pay the one relating to the rented property first as you might fall subject to Income Tax.

Another option would be to sell the house to a pension fund (your pension fund) and let the pension fund rent it and you contribute to the pension scheme. Naturally you need a lot of 41% income for this to work.
 
When calculating the period of time that your current house was your PPR certain periods are "deemed" periods of occupation for the purpose of calculating the relief from CGT. The final 12 months of ownership is always a deemed period of occupation. Therefore even if you occupy the renovated house as your PPR, provided you sell the current house withhin 12 months and it was occupied by you as PPR at allother times, it should be possible to exempt the full gain from CGT.
 
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