Hi All
Apologies in advance, this is going to be a long one. I’ve been going round in circles trying to work out the best order to do things and I think I need some outside perspectives.
My situation:
I own a small 2 bed terrace in the North East (c£110k current market value, bought for £78k in 2019). It’s been rented out since 2020 and is currently tenanted on a periodic tenancy. I am living in Bristol with my partner, renting, and we want to buy a residential property here (budget c£350k).
The plan is to sell the NE property and use the proceeds plus savings towards the Bristol purchase. But the timing and tax implications are confusing me.
Questions:
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If I sell the rental first and then buy in Bristol, I would assume I pay no SDLT surcharge on the Bristol purchase because I would no longer own a second property at completion. Is that correct, or does the timing need to be within a certain window?
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On CGT, from what I can read the gain would be sale price minus purchase price minus costs, with lettings relief no longer available. Private residence relief wouldn’t apply as I never lived in it (unless the last 9 months rule helps, which I dont think it does for a property I never occupied). Am I missing something or is it straightforwrad?
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If for whatever reason I end up buying Bristol first (eg if the right property comes up before the NE sale completes), I understand I’d pay the 5% SDLT surcharge upfront and then reclaim it within 3 years of selling the NE property. Is the reclaim process actually reliable or do people get stuck waiting months for HMRC to process it?
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My partner does not own any property. If we buy jointly in Bristol, does her non-ownership status help at all with the surcharge, or is it the case that because I own the NE property the surcharge applies to the whole purchase regardless?
I would assume selling first is the cleanest approach but the NE market seems sluggish at the moment and I dont want to miss the right place in Bristol because I’m waiting on a buyer in Gateshead.
Many thanks in advance for any thoughts.
Thanks
John
On your point 4, no it does not help. The higher rate test applies to the transaction as a whole. If any one of the purchasers owns another residential property at completion, the surcharge applies to the entire purchase price. It does not matter that your partner is a first time buyer in her own right. The SDLT rules look at each individual buyer and if any of them fail the test the whole purchase is caught. This catches a lot of people who assume the non-owning partner somehow dilutes it.
Selling first is the obvious answer if you can manage it, but that does depend on the NE market cooperating. The 3 year reclaim window on point 3 does work, from recollection HMRC typically process the refund within 4 to 8 weeks once you submit the amended return, though I have heard of it dragging longer.
Your CGT calculation is broadly right but don’t forget you can deduct capital improvements (not repairs) from the gain.. things like a new bathroom or extension that added value. Keep every receipt. You cannot deduct general maintenance or redecoration costs though.
The big one people miss is the 60 day reporting deadline. You have to report the gain to HMRC and pay the CGT within 60 days of completion, not at your next self assessment. Failure to do so attracts penalties and interest. I got caught by this myself on a Sunderland flat in 2023 and ended up paying a £100 late filing penalty which was entirely my own fault for not reading the rules properly (in brackets, I was told about it by the solicitor and still managed to miss it..).
On the NE market.. Blyth and surrounds are actually moving reasonably well for terraces at the £100-120k mark. Gateshead is slightly more variable depending on which end you are in. I would get it listed sooner rather than later because the stock levels are building fast up here and you don’t want to be one of twenty terraces all competing for the same three buyers. Cheers!
The last 9 months only applies if the property was at some point your main residence. If you never lived in it at all you get nothing. No PRR, no lettings relief since 2020. The gain is fully chargeable.
One thing you havent mentioned. Your tenant is on a periodic tenancy. Under the RRA you cant serve a section 21 any more. If you want vacant possession to sell you need ground 1A (intention to sell) and you need to give the correct notice. That takes time. Factor that in before you assume the NE sale will be quick.
Just to add on the CGT, the rate for residential property is 18% or 24% depending on your total taxable income in that year, not the 10%/20% that applies to other assets. If you are recently retired and drawing a pension that pushes you into higher rate, you could be paying 24% on the full gain. Make sure your accountant runs the numbers with your actual income for the tax year in which completion falls, not a generic estimate.
This is really useful, thanks @landlord_fire2031 and everyone else. I’m in a vaguely similar position to the OP (inherited a small sum, weighing up buying) and the CGT reporting bit caught my eye.
One thing I keep running the numbers on is whether selling a rental before buying residential actually saves you money in practice. You dodge the 5% SDLT surcharge on the purchase, sure. But if you’re renting in the interim, paying storage, maybe dealing with a chain collapse on the buy side while sitting on a CGT liability that’s already been reported… the “savings” can evaporate pretty quickly. Especially if the purchase drags on for months, which atm seems more likely than not.
Does anyone know if the 60 day CGT reporting deadline is from completion or exchange? I’ve seen conflicting things online. And is there any flexibility if HMRC can see you’re actively purchasing and the funds are effectively in transit? Feels like a situation where the rules assume a clean sequential process that rarely happens in the real world 
@martin_g77 the 60 day deadline runs from completion, not exchange. No flexibility on it either. HMRC do not care that your purchase is “in transit”. You report and pay within 60 days or you get a penalty.
On the broader point about selling first. The maths only works if your purchase completes quickly. If you sell the rental in June and dont complete on the purchase until October, you have spent four months paying rent on temporary accommodation, storage, and you have a CGT bill sitting there earning nothing. Meanwhile the property you want to buy might have gone up, gone down, or fallen through entirely.
The surcharge reclaim route is the other option. Buy first, pay the 5%, then sell the rental within three years and reclaim. But HMRC takes months to process the refund. And if you cant sell the rental within three years you have just donated 5% to the Treasury.
There is no clean answer here. Both routes carry risk.