David Jetuah, Accountancy Age, Wednesday 2 June 2010 at 09:25:00

Those who hang on to their old houses, classified as a secondary residence,are in line to pay tax if they sell a property which has increased in valueafter three years

Elderly people living in care homes may be caught in the capital gains taxtrap, advisers have warned.

The coalition government is gearing up to raise CGT from 18% to possibly 40%for non-business assets such as second homes.

Those being looked after but still hanging on to their old houses would haveto pay capital gains tax, because the care home is classified as their primaryresidence.

If they sell their house, treated as their secondary residence after threeyears, they will be liable for CGT if the property has gone up in value.

Stephen Herring, senior tax partner at accountancy firm BDO, told theDailyTelegraph: "There is no special relief for people who move into care homes.?

Further reading:

Coalitionwill see CGT hike on the cards

CGTreform comes under Redwood attack

ChrisEvans escapes CGT on car sale