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Tax planning begins at home
Practice area: Wills, Estate Planning & Probate
Mary Ambrose
Any individual or couple who owns more than one home needs to determine which one is their so-called 'Principal Private Residence' (PPR).
This is because, in the great majority of cases, any financial gain made when this property is sold is exempt from Capital Gains Tax (CGT). Tax is payable, however, on any gains made on a second property owned to be let or sold at a profit.
So far, so straightforward – but there is some scope for confusion when it comes to people who are forced to move away from their home, possibly due to a work transfer.
Mary Ambrose, a Wealth Management Solicitor at KCJ says: "Many assume that they will need to pay tax on the sale of their home if they retain it for a time before selling it, this isn't always the case. HM Revenue and Customs (HMRC) recognises that people need time to adapt to changed circumstances, and therefore allow a number of exemptions designed to make life easier".
"First, you have two years following the purchase of a second residential property to decide which should be the PPR, and any home that has been a PPR during the last three years of ownership is CGT-exempt. In addition, being absent from your home for up to three years (indefinitely if you are employed overseas, or for up to four years if you are employed elsewhere in the UK) does not prevent it from being your PPR".
It is certainly worth getting some guidance from a tax planning professional if you own (or intend to own) more than one home. For individual advice, please contact our Wealth Management team.
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