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TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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, I am in the process of selling a buy to let property

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I am in the process of selling a buy to let property I bought 18 years ago and I'm wondering how much tax I will have to pay and also if there are any ways to reduce the amount.
After deducting all outgoings, fees, renovation costs etc I will have left 300K and wonder if there is a way to pay less than 28%. I am usually a low tax payer, earning in the region of 25k pa.


If you make a gain of £300,000, the first £11,100 will be exempt due to the CGT exemption assuming you sell the property in the 2015/16 tax year. As you earn £25,000 per annum, you will pay income tax at 20% on £14,400 (£25,000 - £10,600). That will leave £17,385 of the basic rate tax band left so that of the net taxable gain of £288,900 (£300,000 - £11,100), £17,385 will be taxed at 18% (£3,129.30) and £271,515 will be taxed at 28% (£76,024.20). The total CGT liability will be £79,153.50.

I'm afraid that there isn't much you can do to reduce the liability without keeping the property for a while longer. Unless the property has ever been your main home, you will not qualify for any main residence relief. If you moved into the property for a year or so before selling it, you would qualify for exemption for the gain covered by the last 18 months of ownership (about £23,000 of the gain on a pro-rata basis) and letting relief which could reduce the taxable gain by up to £40,000 per part owner. However, HMRC may challenge your motives for moving in to the property and seek to tax you on the whole gain.

If you are married, you could put the property into joint names which may reduce the amount of the net taxable gain which is taxable at 28% as well as giving you an additional £11,100 exemption. However, if your spouse is a higher rate taxpayer, more of the gain could be taxed at 28% so you would need to look at that option carefully.

Take a look here for information on how to determine your CGT rate and here for information on the main residence and CGT. The 2015/16 tax bands can be found here.

I hope this helps but let me know if you have any further questions.

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