Currently both hubby and I are registered as Self-Employed and pay Class 2 NI as we were both looking after the propertiesI don't follow. Having Property Income from FHL isn't self-employment. After all, you enter it in the L&P pages of your SA return and not the Self-Employment pages. Admittedly, the IT treatment is closer to that of a trade than is BTL income - but it's still not self-employment. I'd have thought you were liable for non-employed NIC if you want to maintain contributions and weren't eligible for self-employed rate (I guess you want the contributions record as it sounds as if you could have claimed small earnings exemption if your self-employment were genuine). would it be better for him to say he's not running it any more?He's a joint-owner of some form so HMRC's initial assumption is that he gets 50% of the income. Who does the work isn't a factor as the income is treated as magically arising from the ownership of L&P without any effort - rather like dividend or interest income. The sharing proportion is capable of formal notification of alteration - but for CGT as well as IT purposes (the IHT position will depend on whether you are joint tenants or tenants in common).I know it's taxed slightly differently, and the CGT is calculated at 40% instead of 10% but would we be able to get around this by swapping houses every 2 years?That percentage bit is wrong but probably arises from Taper Relief being available for (properly qualifying) FHL property at the business rate rather than at the non-business rate for BTL property.The tricky bit in your situation is whether the title could be split and the two properties be capable of being sold independently (so assessed independently for CGT) or whether they must be considered as one property and saleable only as one property with you having let (in different ways) various parts of that one property from time to time.The Council Tax position may be informative. While one place was used for genuine FHL then you should have been paying non-domestic rates on it. Are there separate assessments?Your use as Principal Private Residence during your period of ownership makes a big difference to the CGT position. I rather suspect that the specifics of your circumstances may merit paid-for advice (now rather than after it might be too late to implement a different strategy) but you can be better prepared if you bone up on some of the detail by checking the following links.Check out the detail of Private Residence and related reliefs in IR283 which you can save for subsequent study via this link:http://www.hmrc.gov.uk/helpsheets/ir283.pdfFHL Criteria: http://www.hmrc.gov.uk/manuals/pimmanual/PIM4110.htm et seqCGT Taper Relief: http://www.hmrc.gov.uk/manuals/CG1manual/CG17904.htmCGT Indexation and Annual Allowances: http://www.hmrc.gov.uk/rates/cgt.htmOnce you've conducted further research, you may find that a well-defined question will get a more usable response on the Taxes board:http://boards.fool.co.uk/messages.asp?mid=10586071&bid=50068Cheers!
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