CGT on rental property

mumhancox

Hi all- life was going well unitl it wasn't - i have residential property that i have a joint mortgage with my ex partner - we have basically agreed what I need to buy him out - I moved out of our joint home - and live now at my sons until we can I can get ex paid off. I also own a buy to let property, that is becoming vacant at the end of this month. I looked at raising a mortgage on BTL but with agents commission on re letting this new mortgage at int only and best rate I could find, Plus all legal certificates, insurances, registrations and running costs then deducting 20% tax i would be about £750 a year better off. So I think I have ut it up for sale - my estimated CGT is £23500 - however I am doing all my research and see I may be able to pay part of the profit into a pension and therfore drop some of the profit from the 24% rate to 18% rate. I am hopeful someone can enlighten me more as to more detail on this - as said Im 67 - I draw government pension and a small work pension - plus income from 2 other BTL I own - how do I open a pension pot - and how long do I kee it open and can I draw down on it - many thanks for anticipated help

eskbanker

I am doing all my research and see I may be able to pay part of the profit into a pension and therfore drop some of the profit from the 24% rate to 18% rate

You can reduce income tax liabilities by paying into a pension, which should ultimately reduce the applicable rate of CGT for some of the gain.

https://www.gov.uk/capital-gains-tax/rates explains the calculation, but one factor to consider is that if you're not earning then the most you can pay into a pension is £2880…

mumhancox

Hi Eskbanker - I am earning in as much as I am self employed due to my income from some other rental properties I own does that change the position?

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82178272#Comment_82178272

Yes, for non-earners it's £2880 net, which is grossed up to £3600 via tax relief:

Tax relief is limited to relief on contributions up to the higher of:

100% of your UK taxable earnings

£3,600

https://www.gov.uk/government/publications/rates-and-allowances-pension-schemes/pension-schemes-rates#member-contributions

mumhancox

Eskbanker - i am not a non earner - i have two other properties that i rent out - so I am registered as self employed and pay tax - does that change the position?

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82178289#Comment_82178289

I don't believe that property rental income counts as relevant earnings for pension contribution purposes:

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100#earnings

sherlock228

https://forums.moneysavingexpert.com/discussion/comment/82178289#Comment_82178289

rental income does not class as self employed earnings for pension purposes.
income from rental property is a class in its own right and has always been so, to avoid you being entitled to benefits that accrue to those in receipt of employment income.