Second homeowners 'can reduce CGT'

Date: 20th March 2008

Second homeowners should take action to ensure they do not pay too much capital gains tax (CGT), the Telegraph reports.

Buyers are advised to assess their CGT situation as soon as they purchase their second home, in order to benefit from the tax breaks available to them.

According to Mike Warburton, of accountants Grant Thornton, a majority of second homeowners are unaware that they can reduce the amount of CGT they pay if they choose to sell one of their properties.

At present, the property which was classed as the homeowners' principal private residence (PPR) is exempt from CGT when being sold.

However, if a person uses both properties equally then they are entitled to "make an election" to decide which property will be free from CGT, should they choose to sell.

Second homeowners are advised that the election must take place within two years of buying a second property.

George Bull, of accountants Baker Tilly, commented: " Anyone acquiring a second or holiday home should always make an election within two years of the acquisition - even if only to elect their main home to be the one to which the relief applies, so that they retain the option of varying the election later."

CGT is only applicable when a person disposes of an asset.

For more information on Capital Gains please click here