Selling your holiday home
Remembering the tax implications of selling your second or holiday home is proving important as HMRC cracks down.
The Revenue has revealed it has extensive data on second and holiday home sales and is going after the owners who fail to declare the transaction to HMRC to pay the appropriate capital gains tax.
If a second home has been put up for sale, the tax liability needs to be considered. Reducing the liability is possible and could be achieved through the same reliefs available for a main home, for example expenditure during the period on enhancing the property, original costs of purchase (including Stamp Duty Land Tax paid), or an uplifted base cost if the property was acquired before March 1982. Other situations could be where the property was received from someone’s death estate or from a trust.
However, if there is a potential charge to tax on a sale, it might also be worth reviewing the gain as it may well be lower than HMRC believes. In order to maximise reliefs in the future, it may be necessary to make an election for relief at the start of the ownership of the home, to ensure that the rules for holiday lettings will be met to achieve a lower rate of capital gains tax or consider overseas taxes that might apply for foreign properties.
It is worth knowing that a tax liability applies to second or holiday home sales whether they are in the UK or abroad.