My old house in Birmingham was my main residence from April 2014 to May 2019. The old house cost £207,000, and it was purchased solely in my name. I have rented out my old house from May 2019 to date as I was waiting for the housing market to get better before selling it. I purchased my new house (my current main residence) in May 2019 for £350,000, and I paid stamp duty land tax (SDLT) of £18,080, which included additional SDLT. What I plan to do now is to sell my old house for £300,000 to my own new limited company, which will net me a profit of £93,000. The company has me and my wife as the directors. My questions are: (1) Will I get charged any capital gains tax (CGT), considering that this was my main residence? (2) Will I get my additional SDLT that I paid for the new house reimbursed? My limited company plans to rent out the property. (3) Am I doing everything legally?
Arthur Weller replies:
Dealing with your questions in turn: (1) Let's say you sell to your company in August 2021. The period from May 2019 to August 2021 (i.e. 27 months) will be taxable, less the last nine months’ final period exemption (i.e. 18 months). Ignoring any enhancement expenditure and incidental costs of purchase and sale, the capital gain of £93,000 is spread over 88 months of ownership (i.e. April 2014 to August 2021), and the gain per month is multiplied by 18 months, so you will have a taxable gain of around £19,000. After deducting your capital gains tax (CGT) annual exemption (AE) of £12,300, you will have to pay CGT on £6,700. This assumes that £300,000 is the actual current market value of the house. If you first transferred to your wife before selling to your company, she may also have her AE to offset against the gain. (2) You can claim a refund for the extra 3% SDLT paid. (3) Whilst I am not a lawyer, you appear to be doing everything legally.
