Property:
Your second home
Buying
Buying a second home raises many of the same issues as buying your main home, for example getting a mortgage, or perhaps effectively getting tax relief on the interest. But raising finance to buy a second home is more complicated. The mortgage market is more specialised and there may also be the option of remortgaging your main home to raise finance for your second home. Whatever method you choose to finance the purchase of your second home, please bear in mind that your home may be reposessed if you do not keep up repayments on your mortage. Cassons' mortgage advisers can guide you through the process and arrange the most suitable mortgage for you. There will be a fee for mortgage advice. Our typical fee is £500.Selling
When you sell your home, any gain is usually exempt from capital gains tax. You are entitled to a tax exemption for your “principal private residence”. For more information click here.If you have more than one home, including for example a holiday home, you can get exemption for only one home. Any gain on a second home will be taxable. It is a question of fact which of your homes is your principal one. In most cases, it is obvious. But it can be a subject of some debate with HM Revenue & Customs.
Of course, sometimes you would prefer the second home to attract the exemption. This may be because it will generate the larger gain. Or it may be because the principal residence would be exempt anyway under one of the concessions which ignore certain periods when a property is not your principal private residence. (For more information about these concessions click here.) This can involve some tricky planning!
The good news is that you can make a formal election as to which of your homes should be treated as your principal residence. That will enable you to direct the exemption where it is more needed. The bad news is that the planning can be very complex, especially since it may not be obvious now which property will grow more in value in future years. There is a further complication. An election can normally be made only within 2 years of acquiring a second home. There may be ways round this; but the better planning is to make an election at the outset (and vary it later if appropriate).
Cassons can advise you on all aspects of tax planning for your second home.
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