High Clarity Accountants

TAX TIP OF THE WEEK – Just purchased a holiday home?Make sure you take steps to minimise the eventual capital gains tax liability.

When you eventually sell your holiday home any gain made from property (sale – purchase price) is likely to be subject to CGT.

However, you can use principal private residence (PPR) relief to mitigate some of these gains where you have a 2nd home.

This is done by a process called an election,  whereby you notify HMRC which home is your main residence. The key is to do this in the first 2 years of ownership after which you can switch back to your main home.

This will not only retain your main home PPR but also give you some valuable relief when you eventually sell your holiday home.

For example, if you had a gain of £60k after say 5 years and had an election in place for only 2 months, then you would get relief for 20 months of the overall 60 months of ownership. This would reduce the gain down to £20k, which means if jointly owned between spouses there would be ZERO capital gains tax… RESULT!

Hope this was helpful, for lots more tax tips and strategies get a copy of our 71 ways to save tax checklist https://bit.ly/2YQbhv

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