Capital Gains Tax explained

MPs have the same rules as the rest of us.

But recent headlines have highlighted that, like any rules, you can minimise their negative effects if you know them inside out.

The rules about second homes and Capital Gains Tax are fairly straightforward.

As long as you sell your second property within three years of moving out of it, you are not liable for Capital Gains Tax (CGT).

However if you sell up after that date, the sale will be subject to CGT if the property's increase in value is above the CGT threshold at the time.

How the tax works

If you buy certain assets which you then sell at a future date, the profit is a capital gain.

You can reduce this figure with allowable expenses like estate agents fees, and losses from previous years.

CGT applies to land, buildings, and personal possessions worth more than £6,000, such as paintings, shares or securities. Business assets, like premises, also apply.

Within any tax year, you are allowed some capital gain, tax free. This tax year, the figure is is £10,100 for an individual. Beyond that, the tax is payable at 18%.

There are some exemptions. ISAs or PEPs, UK government gilts, betting, lottery or pools winnings are not taxable. Neither are gains on assets that actually form part of your income - if you are a property developer, for example.

If you're in any doubt, consult your accountant or an independent financial advisor.