CGT again sorry

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    CGT again sorry

    Hi there,

    I appreciate there are CGT topics about, and have searched but need reasurance.

    Situation

    Husband and Wife - Husband owns PPR in own name.

    Husband - higher tax rate payer
    Wife - pays tax at normal rate - 22%

    Have got £200k to invest in property, mainly BTL which want to keep for pension pot.

    I believe that Taper relief is available. Would it be better financially for the Wife to own BTL solely or jointly, considering the personal allowance relief?

    Also i am slightly unclear with taper relief.
    Say they bought a property for £100k then sold in 10 years for £200k what would the CGT be payable if the wife was still paying tax at the normal amount.

    Many thanks

    #2
    It is normally better to buy properties in joint names as tenants in common with your spouse. You can then specify ownership sharing in a trust deed, say 1% to you and 99% to your wife. This will make it easier to change your ownership shares to say 50/50 if your circumstances changes in the future or to receive 2 x annual exemptions for CGT purposes when you wish to sell the property in the future.

    This also hepls for IHT planning if you wish both spouses to benefit from £275,000 nil rate band for each spouse. For this reason, you may wish to transfer the existing property to both spouses as tenants in common.

    Taper relief is applied to reduce the chargeable gains at business asset rates or non-business asset rates. A BTL will be at non-business asset rates. Taper relief was introduced from 6th April 1998 and the rate is dependent on the length of ownership of the property since that date and selling. A bonus year is added if the property has been owned since before 17 March 1998.

    For new properties, rate is 5% after completion of 3 years and a further 5% for every complete year thereafter until you reach a maximum of 40% after 10 complete years of ownership. Taper relief is applied to chargeable gains remaining after all other reliefs have been deducted.

    Assume a BTL has been owned at 17 March 1998, and is sold in 2005-06. Taper relief will reduce gains by 30%. Balance is then reduced by annual exemption of £8,500 and the rest is taxed to CGT.

    In your example, you have a gain of £100,000 less taper relief of 40%, leaving £60,000 less annual exemption in the year of disposal. Rest is added to her other taxable income and gains in the year of disposal and taxed to 10% and/or 20% and/or 40% depending on how much of it falls in the lower rate band, basic rate band and higher rate band.
    Private advice is available for a fee by sending a private message.

    Comment

    Latest Activity

    Collapse

    • inherited house - best to sell or rent
      by Wobble1
      Hi all,

      My father sadly passed away in February, I already owned half of his house as tenants in common via my mothers will (passed several years before), although I didn't live there with him. Have my own house nearby. I am sole beneficiary of his will, and as well as everything else,...
      17-06-2021, 20:32 PM
    • Need CGT help or do i ned an accountant
      by Sara2
      Mother died in 2007 left house to me and my 2 sibs it was family home and i lived in it until 1985 when i had my own house. My brother also lived in house at point mum died and he remained there until 2010 when not being able to sell the property i purchased whole of property by buying brother and...
      13-06-2021, 11:53 AM
    • Reply to Need CGT help or do i ned an accountant
      by Sara2
      I fail to see how i can notify hmrc that rental was terminated in 2019 whilt non paying tenant remained in the property until May 21
      17-06-2021, 19:29 PM
    • Reply to Need CGT help or do i ned an accountant
      by Gordon999
      If you do not inform the Tax Office and just move back to live in the BTL property, the "rental business with tax losses" , can remain in existence for three years.

      https://www.property-tax-portal.co.u...business.shtml

      But the property owner can notify the Tax Office...
      17-06-2021, 12:28 PM
    • IHT, CGT and Income tax avoidance
      by clairol
      So I’ve been listening to some property investment seminars where the suggestion is to buy ‘good’ properties, regularly put the rent up and never sell them.
      The advice is to keep them forever so you do not pay CGT; re-finance regularly and either enjoy the money or re-invest it; pay minimal...
      16-06-2021, 16:40 PM
    • Reply to IHT, CGT and Income tax avoidance
      by jpkeates
      But there's £750,000 mortgage lending to pay off when you die, so the "giving away" is more like a loan.

      I'm not expecting anyone to pay 1p more tax than they should, but I find it's sometimes interesting to replace "the taxman" and "HMRC" with "we/us"...
      17-06-2021, 09:38 AM
    • Reply to IHT, CGT and Income tax avoidance
      by Section20z
      Yes but people who do maths in your example could give the £750,000 away before death so beneficiaries get £400,000 extra and tax man loses ....
      17-06-2021, 09:01 AM
    • Reply to IHT, CGT and Income tax avoidance
      by jpkeates
      It might be popular, but only to people who can't do maths.

      It's only a tax effective policy in the same way that having no money when you die means you don't pay that much inheritance tax.

      Ignoring the reliefs and personal thresholds for simplicity, if you die with a portfolio...
      17-06-2021, 08:10 AM
    • Reply to Need CGT help or do i ned an accountant
      by jpkeates
      Surely the business continued (the rent was still owed, even if not paid) and the business continued until the disposal of the property (assuming it was the only property in the business).

      Your interpretation is more appealing if it can be justified....
      17-06-2021, 07:54 AM
    • Reply to Need CGT help or do i ned an accountant
      by jpkeates
      Whoever gave you that advice doesn't understand how CGT works.
      You straight line the increase between purchase and disposal and you can deduct any time the property was your main residence (plus some additional months) as that period's gain is tax free.

      Any valuation when you start...
      17-06-2021, 07:52 AM
    Working...
    X