Capital Gains Tax and the one year Rule

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    #16
    In view of inflation indexing being removed from CGT, I think we are getting near a point where it is going to start affecting the property market, (and reduce stamp duty income.) I know I certainly won't be selling any of my properties that I've had over ten years. And for London one like the o/p's with tenfold increases, I'd be mad to!

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      #17
      Originally posted by wotsitallabout View Post
      Thank you all again, Gordon 999, this is my retirement money and although the gain is a lot, a £100,000 tax bil of my "pension" is a blow.
      But presumably not an unexpected one.
      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

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        #18
        Originally posted by jpkeates View Post
        But presumably not an unexpected one.
        I rather expect it is. A lot of people seem to see residential property as an alternative form of pension investment, rather than a business, and many were probably never warned about CGT and, in particular, the problem with investments that cannot be sold piecemeal and are where crystallising the gain by selling and buying a different investment is difficult and expensive.

        (Individual residential properties are not eligible for formal pensions, so can't be sheltered from tax as such, and collective ones are limited to a small proportion of the total pot.)

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          #19
          Originally posted by JK0 View Post
          In view of inflation indexing being removed from CGT, I think we are getting near a point where it is going to start affecting the property market, (and reduce stamp duty income.) I know I certainly won't be selling any of my properties that I've had over ten years. And for London one like the o/p's with tenfold increases, I'd be mad to!
          Given the leveraged model that a lot of BtL investors use, indexing would still result in a significant tax hit.

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            #20
            Originally posted by leaseholder64 View Post

            Given the leveraged model that a lot of BtL investors use, indexing would still result in a significant tax hit.
            Not sure where you get that from, but at least it would be fair. For a government to encourage inflation, and then tax a gain caused by that inflation, is taking the p*ss in my book.

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              #21
              What I meant is that typically the investor only pays say, 30% of the cost up front. The remaining 70% is not subject to inflation, but paid as a sale cost. If the property value goes up by 5 times, and using a total purchase price of 1 unit, the indexed cost is 1.5, the nett proceeds of sale are 4.3, That leaves 2.8 that should still be subject to tax.

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                #22
                It is possible that leveraged investments weren't treated this way under indexation, but I think it is the only fair way of treating them, as the aim is, basically, to make a gain from inflation.

                Remember, until recently, no tax was being made from most of the rent, as it was going in things like service charges and mortgage interest.

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                  #23
                  Thank you all,

                  I have been reading and reading etc. So complex. Apparently someone said that there is no "rollover" system but I have been checking "deferral relief" which seems to be abut Section 152 to 160, (Do not ask me which act !).
                  So I am still reading and grateful to you all.

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                    #24
                    The relevant section of the Act is https://www.legislation.gov.uk/ukpga...assets/enacted

                    It only applies to trades and only when the asset is being replaced, not on final disposal. Being a residential landlord is not considered a trade.

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                      #25
                      Those are sections of Taxation of Chargeable Gains Act 1992 and cover rollover relief (and other related mechanisms).

                      Rollover relief is not available for residential property as it applies to properties that have been used for trade.
                      So a commercial property or a holiday let would be eligible, but residential property is not a qualifying asset.

                      Deferral relief is applicable to higher risk investments (which doesn't apply to property either).
                      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

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                        #26
                        Thank you everyone, I am trying to get my head around section 22 and 23 of the TCGA 1992 where if I re-invest proceeds of the sale, CGT is deferred. There seems to be (if I have it correct) that the more I pay for a new property, the less CGT I pay. Have I got this right?
                        Regards

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                          #27
                          No.
                          Section 22 of the act requires that s21 is satisfied.
                          Selling a property doesn't satisfy s21.

                          While I can appreciate that you are keen not to pay a huge tax bill, you must appreciate that if there was any way of deferring or rolling over a capital gain on a rental property we'd probably know about it and lots of us doing it?
                          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                          Comment


                            #28
                            Still trying to get my head around all this and still reading. Thanks everyone, I am grateful. Alan

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