TAX AND HOLIDAY HOMES

Complications in life such as divorces, later marriages second marriages and the general property boom and buy to let boom have led to a significant number of families owning more than one property. Even if the plan was not to have two homes, this is how a significant number of families have now ended up.

Everyone's main home which is referred to by the taxman as "principal private residence" is exempt from capital gains tax when sold but other properties will attract capital gains tax when they are sold. The scale of this capital gains tax on the sale of a second home can be reduced by holding on to the property for at least 10 years in order to benefit from taper relief.

In an unmarried couple each own their own home then each home qualifies as their own principal residence, but if the couple is married they may only nominate one property. There are complicated rules surrounding which your properties would be the principal residence and which one is a second home and you should get qualified, independent financial advice to explore your options before taking any action.

Another common scenario that has been used in recent years to reduce tax liability has been for parents, where a child is going to university, to buy a property in the child's name but with the parent's acting as guarantor for the mortgage. Apart from providing accommodation for the child there is also an income stream from renting out any spare rooms to other students.