Can i avoid capital gain Tax

mooch1uk

Hi

Is there a way to avoid capital gain tax when selling property?

Thanks in advance

K

seven-day-weekend

You don't pay CGT on your main home.

If it's any other property, you have a CGT allowance (I think it's about £8.5k) and any profit over this is liable for CGT. If you have a spouse you can transfer half of the property into their name and then you can use their allowance too. There are other things you can allow for too, but I'm not sure how they work, hopefully someone will come along who does.

These are measures for REDUCING CGT, not avoiding it. The only way I know of not paying it at all is to move abroad, and stay abroad for at least five complete tax years and sell the property whilst you are abroad.

I found this out quite by accident when we moved abroad and we sold an investment property. Then I had to fill in a tax return and rang the Inland Revenue as I wasn't sure what to put in the CGT part. It was them who gave me this information.

So I'm a tax exile until 2009!

Hope someone comes along who knows a bit more.

WHA

What a lot of people do is buy a second home to live in, and then rent out the first home which was previously their "principal private residence". You can do this quite a few times and as long as you have really lived in each as your home, you will get at least 3 years worth of principal private residence relief and also letting relief, so it is very worthwhile.

If you havn't done that, the next best thing is to move into the property for a few months and then sell it - again you get the same sort of relief, but not quite as satisfactory as you are effectively moving into a house that has presumably been rented out, but still good for tax relief.

If you are married, make sure it is transferred into joint ownership, so you both get your annual exemption and basic rate tax bands. (Although there are legal costs involved in the transfer).

If you havn't bought the property yet, consider buying a "business" property, i.e. a holiday cottage (classed as a business as long as you rent it out rather than live in it yourself), or something like a shop with offices above. You get Business Asset taper relief on business premises which is worth far more, more quickly, than non business asset taper relief which you get for dwelling buy-to-lets.