Owning a buy to let property and Tax

Davide123

Lokolo wrote: »

- Keep the property in your name
- Have a ltd company which charges the Rent minus interest only interest
- You yourself then have no tax liability
- The ltd company then runs the business of running the property without actually owning it

Profit can be dividend out, saving you tax as a HRT.

(this isn't advice, but something to be aware of)

How can that work? Ltd co doesn't own but will receive the rents???

Then dividend out? So ltd pay ct @ 20 then he pays tax at 25% on the dividend as a hrt?? How does that save money

Barter

jimmo wrote: »

...Note that the helpsheet in the link above is the latest available but relief for the final 3 years of ownership is to be reduced to 18 months next April...

Hi Jimmo,

As you seem very knowledgeable on the subject, I wonder if you can clarify the situation my daughter is in?

She has a house in London which she & family lived in up to March 2013. She then changed her job & they had to move away; they rented out that house & have been renting in their new place. We'd checked re. CGT & understood they'd have 36 months before it kicked in, so, as long as they sold before March 2016, they'd be OK.

Now the timescale changes in April: does that apply retrospectively to them? Do they now only get until Sept this year? Their tenant has a new baby and they'd (verbally) promised that she could stay 2 years. So they'd feel awful selling this year, but if they'd otherwise be liable for CGT earlier than they thought, they'd have to.

Hope you (or anyone) can shed some light & many thanks for any help.

holly_hobby

No, if they sell post 6 april 2014 (regardless of when they vacated the property prior to this), only the last 18 mths of ownership (regardless of residency) recieves PRR exemption, if they sell pre 6.4.14 last 36 mths still qualifies (under current regs).

But there are various reliefs and exemptions they may apply to any cgt exposure (which is the difference between acquistion and disposal price).

Additionally it will depend upon how its held, joint married tenants = a straigth 50/50 split, or if tenants in common = division of gain which mirrors split of % ownership. ie 99/1 or however it was split and rental income reported, to take advantage of 1 individuals lower tax band than the others.

Applicable deductions/reliefs/exemptions are ...

1. Full PRR for period when it was their main residence & last 36 mths if sold pre 6.4.14, or last 18 mths if sold post 6.4.14, regarldess of residency status.

2. Lettings relief - if the property acted as the primary residence for all beneficial owners, then its 40k per beneficial owner (ie if there are 2 owners/or peeps whom lived in the property as their primary residence, then its 80k ie 40k x 2). CGT is actually based on beneficial ownership not legal ownership, so even if proerty is only in 1 name, there may well be a case to cite beneficial ownership rights and exemptions (but Im assuming its jointly held) Refer the attached for full details http://www.hmrc.gov.uk/manuals/cgmanual/cg64710.htm

3. Acquistion and disposal costs, improvement costs (not maintenance), associated professional fees (but not those associated with CGT submission), previously reported CGT losses.

4. Annual unused CGT exemption, which is per person and currently £10,900 for 2013/14, rising to £11,000 for 2014/15.

5. Any residual gain after application of the above, is reported and taxed at the individuals highest rate, which is 18% for basic rate taxpayers,a nd 28% for higher rate tax payers.

If there are at least 2 beneficial owners (whom qualify for all possible exemptions etc), and unless there is a whopping gain, I would expect there to be little cgt to pay .... but you'll know more once you've crunched some numbers.

Hope this helps

Holly