Can you avoid CGT on a second home by not letting it out?

[BrilloPad]

I have a friend(!) who has a second home, however is not letting it out. To avoid CGT. Is there any truth in this?

[Jessica@WhiteFieldTax]

No. Which ever way you look at it.

The exemption hinges around one home you live in, not how other properties you own are used.

[WTFH]

What if you lived in one and your wife lived in the other?

[FrontEnder]

Even if it was possible, it seems pointless to lose out on rent to avoid paying tax.

You're only paying CGT on the rise in value of the property when you sell it. You're missing out on thousands from rent every year.

Maybe this would be viable if you bought a property that rocketed in price in a very short space of time.

[kaiser78]

You can flip your second home with your first home to avoid paying CGT. This is how a large number of MPs were exposed in the expenses scandal a couple of years ago.

And there is the CGT allowance band + other exemptions that help to zeroise any potential CGT in addition.

[Chart Accountancy]

I have a friend(!) who has a second home, however is not letting it out. To avoid CGT. Is there any truth in this?

Not really, you can only have the principal private residence relief on your main residence. For the second home, if not owned jointly with a spouse, an interest to the spouse can be transferred so that both will use the CGT allowance i.e 2 X£11,300. When the acquisition costs and selling costs are added, the Capital Gain realised less the allowance can be reduced significantly. However, if you think even if some tax is paid, it is better to have a gain and pay some tax but gain overall on the sale of the property, but generally taxes will push the house prices up so that if possible, a higher selling price can be achieved to cover some of the CGT.

[Jessica@WhiteFieldTax]

What if you lived in one and your wife lived in the other?

Not unless you are separated and can prove so. Otherwise one family home.

[Jessica@WhiteFieldTax]

You can flip your second home with your first home to avoid paying CGT. This is how a large number of MPs were exposed in the expenses scandal a couple of years ago.

And there is the CGT allowance band + other exemptions that help to zeroise any potential CGT in addition.

Correct. But those are mitigations rather than changing OPs friends basic inaccurate premise

[Jessica@WhiteFieldTax]

Even if it was possible, it seems pointless to lose out on rent to avoid paying tax.

You're only paying CGT on the rise in value of the property when you sell it. You're missing out on thousands from rent every year.

Maybe this would be viable if you bought a property that rocketed in price in a very short space of time.

Correct. Tail wagging dog

[Chart Accountancy]

You can flip your second home with your first home to avoid paying CGT. This is how a large number of MPs were exposed in the expenses scandal a couple of years ago.

And there is the CGT allowance band + other exemptions that help to zeroise any potential CGT in addition.

The private residence relief only applies for the years you lived in the house plus the last 18 months of ownership even if you didn't live there. Therefore, even if the second home is switched and it is now the main residence, the relief will be restricted to the number of years lived in the property so that there will be a gain which can be reduced by PRR based on the number of years lived in the property.

There is also a letting relief that can be claimed, if you lived in the property during the period of ownership but it is again restricted to the number of years of being main residence (plus the last 18 months).The relief is the lower of £40,000 or the private residence relief available and restricted to the amount of the gain realised.