Capital Gains Tax up to 40%!

chucknorris

HAMISH_MCTAVISH wrote: »

If you only have two or three properties it's irrelevant, as you can simply move into one for 6 months or a year before selling it, making it your primary residence and thus tax free. Then rinse and repeat.

A bigger worry for homeowners and non-homeowners alike is that this would also apply to shares and many other investments. Making saving for a deposit that much harder for renters.

I have in fact already lived in 3 of my 5 investment properties. But that's not how it works Hamish, if you sell a house that has been both your main residence AND has been rented out you then claim 'letting relief'. This allows you an additional 40k allowance and you can 'pro rata' the profit down for the years that you lived there plus the last 3 years in addition, so although it does have a significant effect, it does not make it tax free.


On the subject of shares (and other investments) I think a strategy of selling just before your profit reaches the CGT allowance is required, of course you cannot immediately buy back the 'exact' same shares as this practice of 'bed and breakfasting' was targeted by the Inland Revenue a while ago.

silvercar

HAMISH_MCTAVISH wrote: »

If you only have two or three properties it's irrelevant, as you can simply move into one for 6 months or a year before selling it, making it your primary residence and thus tax free. Then rinse and repeat.

They have to be suitable (size, location) for you to want to move into.

They also have to have made a significant profit for you to have to worry about CGT. CGT allowance is currently £10,100 per person. So a couple jointly owning a BTL would need to make a profit of over £20k once buying and selling costs have been excluded, to be within the realms of CGT.

HAMISH_MCTAVISH

chucknorris wrote: »

I have in fact already lived in 3 of my 5 investment properties. But that's not how it works Hamish, if you sell a house that has been both your main residence AND has been rented out you then claim 'letting relief'. This allows you an additional 40k allowance and you can 'pro rata' the profit down for the years that you lived there plus the last 3 years in addition, so although it does have a significant effect, it does not make it tax free.

So BTL-ers can get significant tax relief by living in them prior to sale.

But if the house has never been rented out? ie, second homes, holiday homes, etc.....

That is then determined by primary residence, is it not?

Premier_2

Jonbvn wrote: »

...BTW, could this be the death knell for BTL?

StevieJ wrote: »

... I can't see them wishing to create a BTL mass exodus.

It's BTL (Buy to Let), not BTS (Buy to Sell)

Surely any disincentive to sell would create the exact opposite of a mass exodus from the BTL market? Landlords will be more inclined to continue to let rather than sell? Or am I missing something here?

Remember it was Maggie that sold the council houses off, and so created the need for more private rental properties. I don't remember Dave, the son of Maggie, having anything in his manifesto suggesting a U-turn of that previous policy

chucky

chucknorris wrote: »

Well that's my retirement plans shelved for quite a long time (if not permanantly) then. It's far better to be continue being a landlord into my 60's and beyond than pay 40% tax on disposal.

Unless of course they are going to reintroduce the old reliefs (taper and indexation, although I would have thought this unlikely).

not really - there are ways round it.

set up a Ltd Co specifically for property management, transfer the properties to the Ltd Co from your name. there is a way of doing this and not paying stamp duty - you would need legal advice from a solicitor on this to make sure it is ok because you may not be able to take out a mortgage on the property if it isn't done properly i believe.

set yourself and wife up as a director; pay yourself a low salary £10k and take the rest in dividends and not having to pay National Insurance.

avoid the capital gains increase and avoide any income tax rises.

HAMISH_MCTAVISH

HAMISH_MCTAVISH wrote: »

That is then determined by primary residence, is it not?

Just double checked. It is.

So it's not quite tax free, but CGT issues are minimal.

On the purchase of a second home, the owner has two years to elect which of their homes is their principle residence. They do not have to be living in it at the time. After the two years, they lose the right to make a nomination and the onus would fall on them to prove that they were living in the second property if they want to avoid CGT.

Moving into a second home will mean that a person's other home becomes liable for capital gains tax for that period, however as this will later return to being their main residence issues should be minimal.

silvercar

Hamish wrote:

So BTL-ers can get significant tax relief by living in them prior to sale.

But if the house has never been rented out? ie, second homes, holiday homes, etc.....

That is then determined by primary residence, is it not?

Most BTLers I imagine live in family homes and rent out inner city flats, so moving into one (properly) is not an option practically. Renting out what was your previous home would qualify.

You can only have one primary residence at a time. (and married couples lose out as they can only have one between them, whereas unmarried couples, if owning two homes not rented out, can have one each). If you have a second home, that is not rented out, you need to declare during the first 2 years of ownership, which is to be designated your primary home. Having done that, you are allowed to change that declaration when you want. So a few months before sale you can swap a desgination to benefit from the "last 3 years of ownership are exempt on anything that has been your home" rule. If you fail to make a declaration in the first 2 years of ownership, the primary designation is decided on fact.

StevieJ

chucknorris wrote: »

I have in fact already lived in 3 of my 5 investment properties. But that's not how it works Hamish, if you sell a house that has been both your main residence AND has been rented out you then claim 'letting relief'. This allows you an additional 40k allowance and you can 'pro rata' the profit down for the years that you lived there plus the last 3 years in addition, so although it does have a significant effect, it does not make it tax free.


On the subject of shares (and other investments) I think a strategy of selling just before your profit reaches the CGT allowance is required, of course you cannot immediately buy back the 'exact' same shares as this practice of 'bed and breakfasting' was targeted by the Inland Revenue a while ago.

You still can Bed and Isa, It becomes much more relevant to utilise your ISA allowance now and yes of course crystallise your gains each year.

HAMISH_MCTAVISH

chucknorris wrote: »

But that's not how it works Hamish,.

And on another note, does that mean the whole todo about MP's flipping properties to avoid CGT was big stink over nothing?

silvercar

StevieJ wrote: »

You still can Bed and Isa, It becomes much more relevant to utilise your ISA allowance now and yes of course crystallise your gains each year.

Assuming you have gains. Isn't everyone saying that these BTLS aren't showing a profit? No profit, no gain, no CGT.