Funds Insider - Opening the door to funds

Welcome to the Citywire Funds Insider Forums, where members share investment ideas and discuss everything to do with their money.

You'll need to log in or set up an account to start new discussions or reply to existing ones. See you inside!

Notification

Icon
Error

Minimise Capital Gains Tax
Stephen Mitchell
Posted: 13 September 2010 16:10:20(UTC)
#1

Joined: 27/11/2009(UTC)
Posts: 1

I have recently sold a property I have had for many years. The property is in joint names and we have made a gain of £50000. How can I minimise my capital gains tax e.g. what allowances can I claim. I am close to the upper tax bracket but my wife is not. Any ideas?
Paul J
Posted: 15 September 2010 09:50:39(UTC)
#2

Joined: 09/08/2006(UTC)
Posts: 7

In hindsight you maybe should have gifted your wife half (or more) of the property before you sold it.
I don't really think there is a lot you can do now, since you have 'realised' the gain.
But I maybe wrong.
I suggest you see an accountant. You may well have been under reporting your allowable running costs over the years (assuming the property was providing a rental income).
Matt A
Posted: 15 September 2010 10:46:44(UTC)
#3

Joined: 19/03/2010(UTC)
Posts: 7

I assume that this isn't your main home, as this would be covered by Principal Private Residence Tax Relief.

When calculating your gain, have you included items such as Lawyers fees etc, as these are all deductable from the total proceeds you have received.

Both yourself and your wife will have a CGT annual exemption of £10,100 to use against any gains made in a tax year.

Do you have any shares that are currently sitting on a loss? It may be worth realising those to offset against this gain. You could always buy them back in one months time to avoid the 'bed and breadfasting' legislation. Alternatively, you could sell the shares and then have your wife buy the same shares at the same time, thus maintaining your shareholding but crystallising a loss.

BillS
Posted: 15 September 2010 11:38:27(UTC)
#4

Joined: 24/04/2007(UTC)
Posts: 3

Have you considered whether you have carried out any "capital" alterations,extensions or IMPROVEMENTS to the property that were reflected in the state or nature of the property on its disposal. If so these costs could be set off against the gain made. Equally if the property was ever your main or principal residence-(PPR) at any time since 1982 then you could minimise the gain by exempting the last 36 months (in addition to any actual PPR period of occupation) and also under the same proviso (owner occupation at some time) qualifying for lettings relief - (LR) (up to £40K per owner) for any periods of letting.

Consult a tax adviser if you consider that you could be entitled to either of the PPR and/or LR

sam a
Posted: 15 September 2010 11:39:25(UTC)
#5

Joined: 23/11/2007(UTC)
Posts: 2

Did you ever live in the property even if you did rent it out?

If you did, the last three years of ownership, along with any time you spent living in the property are tax free.

Say you owned the place for ten years and lived there for 1 yr and the rest of the time it was rented

3/10 + 1/10...ie 2/5th's of the gain would be tax free. You also have your CGT allowances and in addition there is something called 'lettings relief' of up to 40k.

You possibly owe no tax at all. But see an accountant and run this past him.
Richard Curtis (Deputy Editor, Taxation)
Posted: 16 September 2010 13:32:52(UTC)
#6

Joined: 04/11/2008(UTC)
Posts: 4

As suggested above, planning a sale and considering the tax implications are better done before rather than after a transaction and this is a subject which can seem simple, but can throw up many complications when one delves deeper and a detailed reply would take a considerable amount of space.
All of the points made above are valid and may be worth considering and some or all of the gain on the sale of a property may be exempt if it had been used as the only or main residence (including periods when such a property had been let).
We also do not know whether there are, or might be created, losses that could be set against the gain. Remember that such losses can be set off if they are being carried forward from a previous year or occur in the same year, even if after the property sale.
But let us assume that this is a second property that does not qualify for any relief or loss to set against the gain. Perhaps it was a holiday home or a ‘buy-to-let’ and the whole gain is assessable. As suggested above, in some circumstances it might have been better to have transferred the property into joint names, but this may not be one of them.
Remember that both husband and wife are each entitled to the annual capital gains tax exemption of £10,100 to set against their (assumed) half shares of the gain. The husband would have lost this if the whole property had been transferred to his wife before sale.
Rather than work through the calculations here, the HMRC website at http://www.hmrc.gov.uk/rates/cgt.htm has an explanation of the 2010/11 capital gains tax rates and comparative calculations could be done by Stephen. I think that this might be a case where a lower liability arises from joint ownership because the loss of the husband’s exemption would not be outweighed by the wife’s reduced tax rates.
Finally, remember that a flat 18% tax rate applies if the sale took place before 23 June 2010.
This is probably a case where professional advice should be taken.
BillS
Posted: 17 September 2010 01:03:32(UTC)
#7

Joined: 24/04/2007(UTC)
Posts: 3

The questionwer actually said that the property was in joint names!!!
+ Reply to discussion

Markets

Other markets