Home Truths; Ross Clark Answers Readers' Queries to Help Make Your Buying, Selling or Letting Easier
Byline: ROSS CLARK
Second home is a taxingproblem
We bought a flat as our second home two years ago because I have to work away from home. I am retiring this year and we will have to sell it. The housing market has not been buoyant in our area and I don't think we will make a profit on the selling price.
However, we have paid [pounds sterling]30,000 into our endowment policy over this period and so will receive a little windfall when we sell. Will we need to pay capital gains tax on this sum?
No. Capital gains tax is levied on the gain in value of the property, not on the gain in value of an investment fund - in this case an endowment policy set up to fund the purchase of a property.
Depending on what your fund has invested in, you most likely will have paid tax indirectly on your gain, but you won't have to pay a lump sum in tax when you cash in the policy.
Developing profits with garden sell-off
We have been approached by a developer who wants to build on part of our large garden in Slough, the plot being 340ft by 240ft.
We have no idea what the land is worth. How do we establish a fair price and would we get a say in what is built?
This is a substantial building plot, measuring over an acre and a half, with room for a small estate of up to 20 houses. If the local authority were to grant planning permission for a development of this size, you would have won the lottery.
Assuming each house would be worth approximately [pounds sterling]300,000 when finished, and working on the assumption that developers expect to buy land for between a third and half the value of the finished product, you are sitting on an asset potentially worth more than [pounds sterling]2 million.
Much depends, however, on what the local authority would allow to be built: it might prefer fewer houses, say on the grounds of poor access.
Whatever you do, don't rush to sell.
Study the local authority structure plan, which will be deposited in your local library, invite planners to have a look and give you an idea of what might be acceptable, and ask local surveyors to value the land for you.
Only then should you decide to negotiate with this developer - or to obtain planning permission yourself and market it further afield.
Slow solicitors have cos tme dear
When I exchanged contracts last September on the flat I am now selling, I agreed to extend the lease back to its original term of 99 years. …