As a qualified chartered accountant I am very familiar with the tax implications of property transactions and am always happy to work with owners and their accountants to ensure the most effective tax treatment to minimise tax payable.
Portfolio Sales & Minimising Capital Gains Tax
If you are considering the sale of a portfolio of properties it can be very important to reduce Capital Gains Tax (CGT) by spreading the sales over a number of tax years. To achieve this we can set up an arrangement that can work very effectively to ensure you receive certainty in terms of the prices you receive for individual properties, but at the same minimising your tax payable.
Capital Gains Tax (CGT) is charged on the profits made when selling certain assets including investment properties.
Everyone, including children, has an annual CGT exemption, which amounts to £12,000 in the 2019-20 tax year. This means that any gains realised below that limit incur no tax. Gains over the annual exemption are charged at 10% or 20% depending on your other income.
The £12,000 is a “use it or lose it” allowance, meaning you can’t carry it forward to future years. But remember that each individual has their own allowance, so a married couple can potentially realise gains of £24,000 this tax year without incurring any tax liability. You can also transfer assets between spouses and civil partners tax-free, so it might make sense to consider transferring holdings to a spouse in a lower tax bracket or one who hasn’t used their allowance.
Additionally, it’s worth remembering that you have the same CGT allowance every year, so if you have a number of properties it makes sense to sell them over a period of years so that you can use the £12,000 (or £24,000) allowance each year.
Note: From 5 April 2020 CGT on the sale of property is due within 30 days of completion of the sale.
Section 24
If you are a landlord who has been caught out by Section 24 and who is now paying too much tax please get in touch. There are totally legal ways to reduce your tax.
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- Announced in the Summer Budget of 2015, and introduced on 6th April 2017, Section 24 was an amendment to UK Tax Law. It means the amount of income tax relief landlords receive for residential property finance costs is restricted to the basic rate of tax. The changes were introduced in a phased approach with the elimination of tax relief on mortgage interest payments taking place as follows:
- Before April 2017 landlords could offset 100% of their mortgage interest from their rental income
- From April 2017, this fell to 75%
- From April 2018, this fell to 50%
- From April 2019, this fell again to 25%
- In April 2020, it will be reduced to 0% and will be replaced by tax credit of 20%, limiting the short-term impact.
Section 24 applies to:
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- Landlords who are UK residents with residential rental properties, regardless of location
- Non-UK resident landlord with residential rentals based in the UK
- Partnerships and Trusts with residential rental properties
- The perceived Government objective of Section 24, otherwise known as the ‘Tenant Tax’, is to reduce the number of ‘accidental’ landlords operating in the market. Encouraging landlords to become professional property businesses is expected to improve the stability and profitability of the sector to the benefit of landlords and tenants alike.
