Building a second house in the garden

kermie1858 · Apprentice Joined: 11 Aug 2010 Posts: 3

Hi! Few years ago I have bough a house on which I have a mortgage. This house is with the garden that is separated from the property by a shop premises. Now I intend to build another house in the garden and I intend to split the title as soon as it is built. I would like to build this house in the garden in order to sell it and then put the profit made into my current mortgage. Could you tell me what taxes I will be liable for?

pasquale352 · Apprentice Joined: 28 Jan 2009 Posts: 2

In order to save money tax advice needs to be taken before you undertake any transaction. Money which you will gain from selling that property will be liable to CGT at your marginal rate of tax. The sale of any house you don’t live in as your main residence will give rise to a capital gains tax liability. Capital gains tax is the way of taking a 20 per cent of the profit or gain when you sell. Principal residence relief is a relief from the capital gains tax for your house as your principal residence. The relief will apply in full provided you have lived in the house as your main residence. If this is not the case the relief will be reduced proportionately. If you never live in the new house or rent it then you will be liable to capital gains tax on its sale.