Query on selling your house w.r.t. capital gains tax

[baby-bel]

Hello,

We currently have a €154,000 mortgage remaining on our 3bed semi , this was our first house bought almost 6years ago and has been our main/only residence ever since we bought it. The value of our current house is now approx €350,000. We bought it at €188,000. We would like to sell this house and trade up to a 5bed house costing approx €580,ooo & stamp duty.

We have seen a house we wish to purchase but have yet to start the process of selling our current property. We were wondering is it ok to start buying the new house while in the process of selling the current house or do we have to have our current house sold prior to purchasing the new house? We dont want to end up paying capital gains tax as ultimately we only want to have one house, but are worried that because it may take some time to sell our current one that we would be liable for CGT on that one when it finally sells if we go ahead in the interim and purchase the next one?.

Please advise Im frazzeled by it all

 

[Brendan Burgess]

You will pay no CGT if you sell your old house within 12 months of it ceasing to be your Principal private residence.

After that, the gain is prorated. Let's say it takes 2 years to sell. and yo make a €200k gain. You owned it for 8 years. For 25% of the time, it was not you Principal private residence. So you pay CGT on 25% of €200k. Your taxable gain will be €50k. Your CGT will be €10k. (20% of 50)

The biggest issue for you will not be CGT, but paying the mortgage on an empty house. €350k@5% = €17k per year. Quite a few people have been caught out badly by buying before they sell. They have been unable to sell their house. They have been under severe financial pressure and so have been forced to sell the old house at any price.

Brendan

 

[baby-bel]

Thanks Brendan, thats good to know anyway as I couldn't make head nor tail of it myself!