Save tax on your second property

Assume you own and occupy more than one property as your home. Within two years of acquiring the second property, you elect for the new property to be your main home for tax purposes.

Where you occupy a property as your main home then a private residence relief will reduce or wipe the tax out when you come to sell it. Because the relief is generous you are only allowed one main residence for tax purposes.

The story doesn’t end there, because you can change your mind. You decide to change this election so that the first property qualifies as your main home again. In just a couple of letters to HM Revenue and Customs you have managed to wipe out significant amounts of Capital Gains Tax on the second property when you come to sell it.  
When you sell the second home, the increase in value that has built up while it was classed as your main home (the period between the two claims) and for the last three years of ownership, is free of capital gains tax. Three years of the ownership period will be free of tax, even if the property has only been designated as your main home for a very short period, perhaps only a week.

The key is to make the first election within two years of acquiring another residence, or within two years of marrying (or civil partnership). If you have missed this deadline on your current properties it may be worth acquiring a very small third property to give you the opportunity to make the election again.