Capital Gains Tax

Sailaway_2

We own some rental properties and are thinking about selling them and our home during the next 2/3 years. We are toying with the idea of buying a holiday complex with the money to enable us to retire and earn an income at the same time. Does anybody know the best way to do this utilising CGT allowance etc. Thank you in advance.

Elaine_Wilson

So much will depend on your actual circumstances but here are a few initial thoughts.

Rental properties are not, to my knowledge, "business assets" so rollover relief would not be available. The sale of these would therefore trigger a capital gains liability.

The only real flexibility you have is when the properties are sold. You should work out the current taxable gain on each property making sure you claim all the reliefs available. Then there are two strategies to consider.

The first concept is to delay selling for as long as possible in order to maximise the taper relief. This would minimise the chargeable gains but would not result in the least tax.

The second concept is to spread the sales out over as many tax years as possible to

a) use the annual exemptions, and
b) have more of the gains taxed at 20% (if you are not both higher-rate taxpayers)

So, selling earlier would increase the chargeabgle gain but could reduce the tax payable. You will have to play with the various options to decide the best way to achieve this.

This only deals with the tax aspect. More importantly you need to consider how you think property prices will change over the period, and the level of income you could achieve from holding cash rather than renting property.

This post is getting a bit long and I'm not sure if I'm actually answering your question. Please post again if there are specific areas you would like to know more about.

You will probably find more knowledgeable people on the Cutting taxes board but I hope this gives you something to think about.

telly-addict

Sailaway wrote:

We own some rental properties and are thinking about selling them and our home during the next 2/3 years. We are toying with the idea of buying a holiday complex with the money to enable us to retire and earn an income at the same time. Does anybody know the best way to do this utilising CGT allowance etc. Thank you in advance.

If 'we' are husband and wife that pay tax at different rates, classic example of non taxpaying spouse, then you could consider transferring the properties into the non-taxpayer's name, so that on sale the gain is charged at a lower rate. This is perfectly allowable, although it is worth allowing a 'reasonable' amount of time between transfer and sale.

As previously stated, rental properties do not qualify for rollover relief, although furnished holiday lettings do. For details of what qualifies as a FHL see:
http://www.hmrc.gov.uk/manuals/pimmanual/PIM4105.htm