Winning a multimillion-dollar house in a competition seems like a dream that cannot be achieved for many people, but this dream can also constitute a tax burden if the winner sells this house instead of moving to it, and in this regard, accountant Nimish Shah talks about tens of thousands of pounds. sterling that would be due in capital gains tax in such circumstances.

It comes on the heels of a couple putting their “dream” property in Kent on the market for £2.65m, nearly $3.3m, after winning a prize draw just last year.

The couple win a house from Omaze

The couple in the Midlands won the luxurious home worth 2.5 million pounds, equivalent to more than 3.1 million dollars, via a drawing on the website Omaze In the fall of last year.

They described the win as “beyond their wildest dreams,” and said it changed their lives forever. However, what they didn’t know when they made the decision to sell the property was that there was a possible capital gains tax liability, and capital gains tax is a tax on the profit when you sell an asset. – Like property – which has increased in value.

“When someone acquires the property through drawing in this way, the cost of their capital gains tax base is considered to be the market value of the property at the time of purchase,” Shah explained.

The couple made the wrong decision to sell the house

Assuming the market value of the property when won is £2.5m – as declared in the drawing – then the primary cost of capital gains for the prize winner.

If the couple later sold the property for £2.65m, they would make a capital gain of £150,000, which is calculated by taking £2.65m and subtracting the base cost of capital gains of £2.5m.

“The annual capital gains exemption has to be deducted, which is currently £12,000, reduced to £6,000 and then to £3,000 from April 6, 2024,” Shah continued.