Capital Gains Tax up to 40%!

chucky

Vincenzo wrote: »

I don't see how it makes sense to intentionally reduce your profits to avoid tax. I would rather have the remaining 60% after tax than choose to give up 100%!

A good accountant should be making the most of any allowances and offset costs against profits etc...

i'd rather have no mortgage on my residential and have a mortgage on BTL's. these help you with increasing costs and potentially making a loss.

there are lots of legal ways to take money out of your Ltd Co - maximising these so that the Ltd Co makes a loss and the less you spend out of your personal income on your residential home costs is where I'm going.

chucky

Pete111 wrote: »

Any thoughts much appreciated!

P

go to the forum on www.landlordzone.co.uk or .com not sure which it is.
they give you decent advice.

i think you pay on the 6 months over the 3 year PPR period but then it can be reduced further. but best if you ask across there.

they will have a few suggestions.

kennyboy66_2

StevieJ wrote: »

So it looks like the BTL landlord will be OK under the Tories but the rest of us better utilise our allowances unless of course they take them away :eek:

Meanwhile, in a major revenue raising initiative, the new government will hike the capital gains tax paid on non business assets to 40%, from 18%, the Financial Times reported. A Conservative spokesman was not available for comment.

Why would this not apply to BTL ?

No-one can really be surprised by this, there has been a mammoth conversion of income into capital gains by private equity and the like.

As far as BTL goes, I still wouldn't be surprised if interest costs were limited in their offset against income.

There hasn't really been much social benefit in the boom in BTL over the last 15 years - all it seems to have done is build a load of sub-standard flats, in the wrong locations, where no one wants to live. If it had added to the stock of rented family homes then fair enough, but it hasn't.

These are fax.

Degenerate

Prior the 2006 change it was 40%, but with taper relief, which made the rate progressively reduce the longer you held the asset. If they re-introduced the taper relief along with the rate hike it would not be so bad. Without taper relief this would be a frickin outrageous hike.

chucknorris

Pete111 wrote: »

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.

QUOTE]

CN you seem to be up to speed re this - can you give me your views on the following scenario pls?

Flat bought by me and my then girlfriend (now wife) on a joint basis in 2004 for 250k

We lived in it for 3.5 years until sept 2007, since when we have rented it out for a net profit of approx 2k per annum

We are potentially (depending on the market) looking to sell this time next year. I would hope to get 350k for it (looking at similar 2010 sale prices and assuming no fresh crash!)

Assuming a 100k gain and there being 3.5 years since we moved out - what sort of CGT bill (if any) are we looking at if CGT is 40%. Also, would we be able to make use of lettings allowance?

Any thoughts much appreciated!

P

I was going to actually work it out for you but when I started to I immediately realised that your CGT bill will be nothing.

Assuming letting relief remains in place you will get a further 40k allowance. I don't actually know if you both get this, but let's assume not. in addition to your personal allowance (both of you so 20k). You can also pro-rata the profit down from when you lived there plus the last 3 years, so that will reduce the profit to about an 1/8th. With the stamp duty, solicitors fees, estate agents fees etc you are nowhere near paying CGT.

chucknorris

Degenerate wrote: »

Prior the 2006 change it was 40%, but with taper relief, which made the rate move progressively reduce the longer you held the asset. If they re-introduced the taper relief along with the rate hike it would not be so bad. Without taper relief this would be a frickin outrageous hike.

I totally agree but the poblem is that the economy is in such dire straits that outrageous hikes have to come from somewhere, which is why I suspect that taper relief (or something similar) might be introduced in the not too near future again, but unfortunately not straight away (I wasn't planning on selling for about 10 years anyway).

Jonbvn

Premier wrote: »

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?

Have you never noticed the numerous property !!!!!! on the TV, with people purchasing homes for quick profit?

Surely you wouldn't disagree that this increase in CGT would act as a huge disincentive for anyone considering investing in BTL?

chucknorris

Jonbvn wrote: »

Have you never noticed the numerous property !!!!!! on the TV, with people purchasing homes for quick profit?

Surely you wouldn't disagree that this increase in CGT would act as a huge disincentive for anyone considering investing in BTL?

I actually bought mine almost 20 years ago and wouldn't sell for at least another 10 years. But you are right, there are a lot of investors looking for capital gain rather than income and it will certainly deter those investors. It will also make it slightly attractive to those interested in the long run too if taper relief is not re-introduced (at some point)

Vincenzo

chucky wrote: »

i guess paying for the right solicitor would be the way to do it.

what happens when properties are given as gifts?
do you pay stamp duty?

I believe a property given as a gift is deemed to have been transfered at the market value and SDLT is payable as such.

Vincenzo

chucky wrote: »

i'd rather have no mortgage on my residential and have a mortgage on BTL's. these help you with increasing costs and potentially making a loss.

there are lots of legal ways to take money out of your Ltd Co - maximising these so that the Ltd Co makes a loss and the less you spend out of your personal income on your residential home costs is where I'm going.

It makes no difference where your debt is secured. I have borrowed on a residential property to buy an investment property and offset the interest against the income from the investment. Even with the company scenario you can lend money to or borrow it from your company.

I agree you should maximise allowances and ensure you set things up in the most tax efficient way.