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As specialists in tax Advisory and Accountancy we are aware of the challenges faced by property investors / landlords / developers in the UK. Our team offers comprehensive advice on managing the implications of Capital Gains Tax when selling, gifting, or transferring a property. We provide comprehensive advice on CGT, including calculations, reporting, and payment. Moreover, we can guide you on claiming various reliefs and address potential complexities
Changes in the use of a property during the period of ownership can add complexity to Capital Gains Tax calculations. For instance, if a property initially bought as a primary residence is later turned into a rental property (or vice versa), or if a part of the property is used for business, it could impact the amount of tax due.
If a property has been the owner’s main residence at any point during ownership, Private Residence Relief may apply, reducing the Capital Gains Tax. Calculating this can be complex if the property has not been the main residence for the entire period of ownership.
Previously, landlords could benefit from Lettings Relief on properties that were once their main residence. However, since April 2020, Lettings Relief is only available to landlords who share occupancy with their tenants, making the situation more complex for those who used to live in their rental property.
The way the property is owned can affect the Capital Gains Tax. For instance, if the property is owned jointly or in a partnership, or if it is held in a company structure, the tax calculations and implications can be quite complex.
Different rules may apply for periods of absence, for instance, if the property was empty, or if the owner lived abroad, which could affect Private Residence Relief and the final Capital Gains Tax calculation.
Costs of improvements can be used to reduce the gain and thereby reduce the Capital Gains Tax. However, distinguishing between ‘repairs’ (which are a revenue expense deductible from rental income) and ‘improvements’ (which can be offset against Capital Gains Tax) can be complex.
Determining the actual ‘gain’ from the property sale can be complex. This needs to account for the original purchase price, associated purchase costs, improvement costs, and costs at the time of sale.
If a landlord makes a loss on the sale of one property, this can be offset against gains on other properties. The rules around this are complex and proper recording and reporting of losses are critical.
When it comes to commercial properties, different tax rules and reliefs apply. While some complexities remain similar, like calculating the gain or changes in use, there are other factors and potential reliefs to consider.
If you are a business owner or a partner selling or gifting all or part of your business together with a business property and all conditions are met, you might be eligible for Business Asset Disposal Relief, formerly known as Entrepreneurs’ Relief. This relief may reduce the Capital Gains Tax rate when disposing of qualifying assets to 10%. This is subject to £1m gains lifetime allowance.
In some cases, when you gift business assets, including property, or sell them for less than they are worth to help the buyer, you might be able to ‘hold over’ the gain until they sell it. This relief allows for the deferral of the Capital Gains Tax liability to a later time.
If you sell or dispose of certain business assets or business property, you may be able to postpone paying Capital Gains Tax if you replace the assets. The tax is deferred until the new asset is sold or disposed of.
If your gains from selling a property are invested into qualifying EIS (Enterprise Investment Scheme) investments or similar, these gains can be deferred.
This was a method to account for the impact of inflation when calculating the taxable gain on the disposal of business assets. It’s been frozen since January 2018 but could be relevant for properties held in a company structure that were acquired prior to this date.
Our services go beyond these areas, covering all aspects of property tax. We are dedicated to helping you make informed decisions and ensure tax efficiency in all your property dealings.
Why work with us
We believe in personalised service, understanding each client’s unique circumstances, providing tailored solutions, timely service, and peace of mind. Navigate the Property / Real Estate Taxation landscape with confidence.
