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Basic CGT question


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Am thinking about selling a buy to let property I bought 8 years ago. I have never lived in it, so I imagine my changes of avoiding capital gains are pretty slim. My wife and I have, however, been living in privately rented accommodation for the past 4 years, so have had no main private residence for that time. Does this have any bearing on the situation?

The mortgage is currently only in my name so I imagine it would make sense to get my wife's onto the deeds? I'm aware of Taper Relief, but I'm otherwise in the dark.

If we sold it now we would probably clear £100K, and obviously don't want to be giving 40% of that to the IR. Is there action we could take to avoid paying the full whack.

Any clues (the lovely Plym77 perhaps?)

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Hi Cat

Unfortunately there us not a whole lot you can do as you have not and will not (I assume) ever live in the property. The fact that you have been in rented accomodation unfortunately has no bearing in this situation.

Consider putting the house in both names - but not by changing the Deeds as this is a lot of hassle and quite unneccesary. Instead go to a solicitor and ask that a Declaration of Trust is drafted and put into place. Do this for the level necessary to utilise the allowances available to your wife, so certainly enought to cover a resulting gain (after Taper etc) which would equate to the CGT annual exemption, currently £8,800. But also consider any inequality in income, for example, if you are a higher rate tax payer and your wife has no income, you should consider whether to put a larger proportion of the property in to her name to utilise her basic rate band.

The only other thing you could consider is deferment of CGT by possible investment of some of the proceeds. This is turn could eventually mitigate any CGT. This is an element of risk involved with this sort of planning, however, there can be benefits. You would need specific advice on this - which I can help with - I cannot unfortunately generalise on this.

Assuming that you have held the property since 17 March 1998, you would be entitled to Taper Relief of 35%, so assuming your 'pre-taper' gain is £100k, £65k would be chargeable. Take from this your individual CGT annual exemptions of £8.8k each and you are left with a balance of £47,400. At best CGT would be £9,480 and at worst , twice that.

There is also further planning that can be done if you have children over the age of 18, by gifting a share to them in one tax year and selling the property the following tax year - this takes a little consideration and I cannot generalise on this really.

The easiest saving is to involve your wife, but remeber that a Declaration of Trust must be implemented BEFORE you exchange contracts on a future sale.

The above information is of course general. Should you require a specific review, please email me on sherena.glanton@horwath.co.uk



(Plym 77)

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