Capital gains tax on secondary home in uk

[Trickynickyflowers]

Now, I appreciate that I may confuse some of you along the way so please bear with me and forgive my ignorance - I have read all of the books and still can't quite grasp the rules!

We have just sold our primary home in the Uk and have a secondary home in the uk on a buy to let mortgage. We rent this property out. We also have a house in France with a french mortgage and hope to move to france for good in a few months.

The query I have is in relation to what mortgage to pay off with the proceeds of our primary home in the uk and what capital gains I am liable for.

As I understand it, the money from our primary residence is tax free but any income from our buy to let house is subject to cap gains. If we paid off this mortgage and then decided to sell it -would we be subject to capital gains on the entire amount OR just the difference between what we paid for it and what we sold it at ( exc our personal allowance and running repair costs if that still stands)Also if we were then using the rent to live off in France, would we be taxed on that too? - and by who? Uk or France or both?

Is there a way of making our seondary residence our primary residence before we move to france so that we do not have to pay capital gains? Are there any rules re selling primary residence or indeed secondary after you have become resident in France.

Finally, if any of you experts had a choice - pay off french mort or pay off secondary buy to let mortgage, all being equal, what would you do - or is there another way.

I appreciate I am asking alot so any help at all appreciated.
Nicki

[BJSLIV]

You need to take proper professional advice on this,otherwise you could end up paying avoidable tax.Your problem is that you will need someone who understands the rules both sides of the Channel, and they are rare and/ or expensive

However a few pointers....

>As I understand it, the money from our primary residence is
>tax free but any income from our buy to let
>house is subject to cap gains. If we paid off
>this mortgage and then decided to sell it -would we
>be subject to capital gains on the entire amount OR
>just the difference between what we paid for it and
>what we sold it at ( exc our personal
>allowance and running repair costs if that still stands)

You pay income tax on income and capital gains tax on capital gains. So until you sell it no capital gains.There may be some benefit in keeping the loan on this house as the interest is an expense which reduces your net income and hence your tax.
The fact of having a loan makes no difference to the taxable gain. The gain is what you sell it for, less what you paid, less any major improvements carried out.

>Also if we were then using the rent to live off in
>France, would we be taxed on that too? - and
>by who? Uk or France or both?

The net income would be taxable in France if you a resident in France. There are ways of avoiding it being taxed in the UK.

>Is there a way of making our seondary residence our primary residence before we move to france so that we do >not have to pay capital gains? Are there any rules re selling primary residence or indeed secondary after you have become resident in France.

You may be able to reduce your capital gains tax by living in the property for a reasonable period , (minimum six months?),before moving to France, but the benefit of this will depend on how long you have owned the property, the size of the gain etc etc. Once you are in resident in France it can't be you main residence.
>
>Finally, if any of you experts had a choice - pay
>off french mort or pay off secondary buy to let
>mortgage, all being equal, what
>would you do - or is there another way.

See above.But it really depends on If you need to realise the money from the buy to let. Do you want to keep a toe-hold in UK. Do you think UK property is going to fall? Can you manage the property remotely.


All very complicated. Remember we aren't experts, more like the bloke down the pub, and he isn't always right.

GET PROPER ADVICE!!!

[Coral]

I am in a similar situation due to an inheritance situation and I managed to get some advice from an investment/financial advisor. New client so first hour free of charge!

My understanding/thoughts are: 1)being a non-resident you can avoid paying tax on income from rental in UK but tax would be payable in France. 2) if you have ever had the secondary home as your primary home then there is an allowable CGT deduction, even if you come back and live in it while it is up for sale. I forget the minimum total length of time. There may also be other deductions. 3) if you use GBPs for paying off a Euro mortgage there is the possibility of currency risk. 4) your UK mortgage rate is higher than your French rate, but you could check on the possibility of offsetting it against the tax payable in France.
5) if the amount you get from selling your primary residence is invested off-shore the return you get would probably be higher than your French mortgage rate and could be used for the repayments, also retaining a valuable asset for any future disaster.

You really should talk to a professional who would be able to assess you situation as I am just applying what I have picked up from my long discussions with bank, solicitor, accountant and financial advisor. The smaller companies will often give you a free first interview.
Good Luck
Coral