We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

capital gains tax

Do anybody know how to avoid paying capital gains tax on a second property?

Comments

  • there are two ways to avoid capital gains tax.
    1. To live in your 2nd property for as little as 3 months (they advise 6 months but 2 is passible)
    2. If the gains is less than i think around £15,000 you do not have to pay tax on that.

    If you live with a partner then "move out" and live in your second property, if it is vacant. register with the council tax in your name and pay the council tax. i hear you say; "i have to have no tenant for 3 months and pay about £500 council tax! it is not worth it!"

    maybe, maybe not. lets say your capital gain would be £50 - £60,000 then £35k-£45k is taxed at 40% equalling £14 - £18,000 tzx bill. I think losing £3-4,000 in rent (repayments) and £500 council tax is negligible when making the saving.

    You can live in the 2nd property and stay most nights with your partner at your old address....

    Visit https://www.PenaltyEscape.co.uk
  • Are you sure about this for CGT on properties?

    I thought that private residence relief (i.e. CGT relief) applied when you lived in a property and for the last 3 years of ownership. Therefore, if you let the second property out for more than 3 years, then you would be liable for CGT on that proportion of the gain.
    e.g.
    own for 5 years. live in it for minimum period toward end of ownership.
    then liable for CGT on 2/5 * Gain.
    Better than paying the full CGT, but still significant.
  • I have a related question about CGT on residential property.
    Scenario: Lived in property for 5 years, now let it out.
    Now if what I described in the previous post is true (c.f. IR documentation), then after 3 years of letting out the property, any further letting means a CGT liability.

    The property has doubled in property in the last 5 years, but is unlikely to do that in the next 5 years (well at a guess). Therefore, I would prefer to realise the capital gains whilst it is still eligible for private residence relief. One way of doing this would obviously be to sell the property, but lets say I want to hold onto it as an investment.

    Is it possible to realise the capital gain now, e.g. by selling it to a company that I own? Are there any tax implications in doing this?

    I realise that as a residential property it will count as a non-business asset for purpose of taper relief etc.
  • If you have at some time lived in a property that has been rented out there is a further relief available called Lettings relief.

    In the example above this could give a tax free period of ownership up to 16 years.

    Assume the property is sold after, say, twelve years.

    Private residence relief is 8/12ths (5 years plus the last 3)

    Lettings relief is the same amount subject to an overall cap of £40,000.

    Transferring to a company would trigger the capital gain now. Note that as you and the company would be connected persons the transfer would have to be at market value.

    The disadvantage with this idea is that the rents belong to the company and drawing the money can involve additional tax. Also if the property is sold the company pays corporation tax on the gain. Taper relief is not available as companies still get indexation relief. If you want to get this money out of the company again it usually involves extra tax.

    Elaine
    If it’s not important to you, don’t consume it
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 348.3K Banking & Borrowing
  • 252.1K Reduce Debt & Boost Income
  • 452.4K Spending & Discounts
  • 240.8K Work, Benefits & Business
  • 617.1K Mortgages, Homes & Bills
  • 175.6K Life & Family
  • 254K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.