How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask bigduckontax Your Own Question
bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4420
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

How can I reduce capital gains tax on the sale of a buy to

Resolved Question:

How can I reduce capital gains tax on the sale of a buy to let property.
Submitted: 24 days ago.
Category: Tax
Expert:  bigduckontax replied 24 days ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

Is this residential property? Is is your sole or main domestic residence?

Customer: replied 24 days ago.
No. It is a buy to let which we have had since 2000. Has been rented since then. last 5 years used by my daughter who was paying a reduced rent to cover mortgage payments.
Expert:  bigduckontax replied 24 days ago.

Right them, bad news I regtet even more so if you never occupied it, please advise.

Customer: replied 24 days ago.
Never occupied property. Not primary residence.
Expert:  bigduckontax replied 24 days ago.

You will be liable for capital Gains Tax (CGT) for the entire period of ownership less the last 18 months when you are deemed to be in occupation even if this is not the case. You will have a gain on sale of which say 91% will be subject to the tax at 18% or 28% or a combination of the two rates depending on the individuals' income including the gain in the tax year of disposal. The gain is divided by 2, half each and both of you have a non cumolative Annual Exempt Amount (AEA) of 11.3K to offset this.

I do hope that yu have found my reply of assistance.

Customer: replied 24 days ago.
Can you tell me some ways to maximise tax releif on the gains eg maximaise pension contributions, certain investment products ets
Expert:  bigduckontax replied 24 days ago.

Sorry, no save to buy a new buy to let within 3 years then the gain can be rolled over and tax deferred. Pension contributions are allowable against Income Tax (IT) not CGT. By making pension contributions your income for IT is reduced thus exposing more at the 18% level for taxation. There is currently an annual lilit of 40K on pension contributions including any made direct by your employer.

Customer: replied 24 days ago.
Are there any investments which give tax releif ? Can you use money to buy property in another country and delay the tax paid. . We are dual citizens
Expert:  bigduckontax replied 24 days ago.

You could obtain roll over relief, yes.

Customer: replied 24 days ago.
Can you buy property abroad as a second home and get releif ?
Expert:  bigduckontax replied 24 days ago.

Only as roll over relief, yes.

Customer: replied 24 days ago.
Any investments which can give tax relief?
Expert:  bigduckontax replied 24 days ago.

No, only roll over relief to defer the CGT.

Customer: replied 24 days ago.
What about investments which attract tax relief on IT. This can offset CGT on the capital gain.
Expert:  bigduckontax replied 24 days ago.

You refer to ISAs and SIPPs I assume.

Expert:  bigduckontax replied 24 days ago.

An EIS can reduce the tax.

Customer: replied 24 days ago.
Would like further information on EIS.
Expert:  bigduckontax replied 24 days ago.

Here is the guidance from Brewin Dolphin:

'Any gains that are made on investments in an EIS (Enterprise Investment Scheme) are free from CGT if held for three or more years.

If the shares are disposed of at a loss, one can elect for the amount of the loss, less any income tax relief given, to be set against income for the year in which the shares were disposed of – or any income for the previous year – instead of being set against capital gains.

CGT deferral relief is available to individuals and Trustees of certain Trusts. The payment of tax on a capital gain can be deferred where the gain is invested in a share of an EIS qualifying company. The gain can arise from the disposal of any kind of asset, but the investment must be made within the period of one year before or three years after the gain arose. There is no minimum period for which the shares must be held; the deferred capital gain is brought back into charge whenever the shares are disposed of, or are deemed to have been disposed of under the EIS legislation.

The downside of EIS is that generally these types of schemes are higher risk than traditional stocks and shares'

I do hope that you have found my guidance of assistance.

bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 24 days ago.

Thank you for your support.