Will we owe capital gains tax on a second home?

Q My wife and I are joint owners of our existing property which we have lived in for a year. We have recently purchased a second property using a buy-to-let mortgage scheme. We are looking to possibly rent out our current property for six months and then sell it.

We brought our current property for £200,000 and we will be looking to sell for around £215,000. Will we be liable for capital gains tax when we sell?

DG

A Based on the details you've given, it seems highly unlikely that you will face a capital gains tax bill when you eventually sell your current home. Even though you plan to rent out the property before you sell, the fact that it has been your home and you have actually lived in it should mean that you qualify for what HM Revenue and Customs refer to as "private residence relief". This means that, provided you sell the property within three years of moving out, any gains from selling the property will be tax-free.

However, even if you live in a property, you won't qualify for private residence relief if you are doing a "property ladder" and buy and sell property merely with the object of making money from it. More information on the rules relating to private residence relief are available in the free HMRC Help Sheet which you can download here (pdf).