Minimising tax on sale of BTL by contributing to SIPP

Aceace

Dazed_and_C0nfused said:

I agree with previous posters about the pension contribution being beneficial in this situation.

Although it has no impact on the amount of the gain that will be taxed it could move more (or all) of the gain into being taxed at 18% rather than 28%.

This is covered in this article.

https://www.canadalife.co.uk/technical-support/reducing-cgt-on-gains-using-pension-contributions/#:~:text=Pension contributions can be used,CGT payable on the gain.

The complication is that a DB pension is involved so although exceeding the tax relief limit doesn't seem to be an issue the annual allowance limit may be.

However given the sale isn't expected until the next but one tax year a lot could change in the meantime!

£55k capital gain on sale of BTL (bought for £115k 10 years ago, expected sale for £170k in May 2023).

Oops, my mistake. That should say 2022. I'll fix the original post. 

saucer

Coming back to this old thread, can I please double check that my assumptions are correct. I am in the process of selling a BTL and I am a higher rate tax payer. Can I reduce my CGT liability through a SIPP contribution, up to my annual allowance (including unused allowances from previous years)? From reading the linked article it would appear this would extend the amount of CGT I pay at 18% rather than 28%. Is that correct?

saucer

Partly answering my own question, I think I have been mistakenly thinking that the CGT calculation is based on earned income after pension contributions. I am now suspecting that this is irrelevant apart from benefit that I can get from maxing pension contributions using the proceeds of the sale. Is that right?