CGT & BTL Sale. Any ideas?

CGT & BTL Sale. Any ideas?

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Discussion

Blanco92

Original Poster:

206 posts

86 months

Thursday 21st November 2024
quotequote all
Mother has a BTL property, and lives (renting) elsewhere.

It is expected she will sell the BTL at some stage perhaps in 3yrs or so. The BTL property is expected to have tripled in value since she bought it approx 15yrs ago. So it is expected CGT will be due.

So thoughts are turning as to smart moves that could be done to reduce exposure to CGT. Any ideas?

One thing up for consideration is to transfer ownership from her personally to a company to reduce exposure to the higher rate of CGT. But maybe there are other options?

LooneyTunes

8,249 posts

173 months

Thursday 21st November 2024
quotequote all
Blanco92 said:
One thing up for consideration is to transfer ownership from her personally to a company to reduce exposure to the higher rate of CGT. But maybe there are other options?
Transfer to company is no different to selling it to someone else… and you’d have the elevated SDLT to deal with as well.

You’re going to struggle to find any way to avoid CGT on it.

PM3

987 posts

75 months

Thursday 21st November 2024
quotequote all
I have an idea. Pay the tax
Based on that assumption and more importantly if the plan to sell is a definite, I would strongly suggest that while these lunatics are in charge potentially the future tax is only likely to get worse. I see no reason why they will not adjust such taxes upward , so best get out now rather than at a later future tax rate ?
The anguish of paying some new loony rate ( 40 % ? ) of CGT would soon wash away any bitterness in paying at todays rates

akirk

5,775 posts

129 months

Thursday 21st November 2024
quotequote all
If she is renting elsewhere is it her only house?
Would it not count therefore as a primary residence

No different to military who go abroad but rent out this or house at home etc

anonymous-user

69 months

Thursday 21st November 2024
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Isn't the usual answer to boot out the tenants from the BTL and live in it for 6 months?

PM3

987 posts

75 months

Thursday 21st November 2024
quotequote all
MrBig said:
Isn't the usual answer to boot out the tenants from the BTL and live in it for 6 months?
She would still pay the CGT based on the time it was not main residence. Now living in the house does not wash the absent period.

Peterpetrole

716 posts

12 months

Thursday 21st November 2024
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MrBig said:
Isn't the usual answer to boot out the tenants from the BTL and live in it for 6 months?
Would still be taxed on the uplift for the whole time she wasn't living there

TownIdiot

3,527 posts

14 months

Thursday 21st November 2024
quotequote all
The only way of reducing the CGT is to live in it.

If that's not feasible then there isn't much you can do about it

ThingsBehindTheSun

2,028 posts

46 months

Thursday 21st November 2024
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TownIdiot said:
The only way of reducing the CGT is to live in it.

If that's not feasible then there isn't much you can do about it
This, why is she choosing to sell it, pay the CGT and continue renting? Would it not make more sense to just live in it instead?

PM3

987 posts

75 months

Thursday 21st November 2024
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People sure go off on tangents asking irrelevant questions. OP asked for ideas on CGT avoidance, not advice for mother as to where she wants/chooses to live .

Peterpetrole

716 posts

12 months

Thursday 21st November 2024
quotequote all
PM3 said:
People sure go off on tangents asking irrelevant questions. OP asked for ideas on CGT avoidance, not advice for mother as to where she wants/chooses to live .
It's hardly irrelevant. We've all agreed it's impossible to avoid so why not develop the thread a little, it's good internet etiquette.

TownIdiot

3,527 posts

14 months

Thursday 21st November 2024
quotequote all
PM3 said:
People sure go off on tangents asking irrelevant questions. OP asked for ideas on CGT avoidance, not advice for mother as to where she wants/chooses to live .
The way I see it the only way to legitimately reduce the CGT is to move into the house and make it her main residence.
So it's not going off on a tangent to suggest she moves in.
It makes not be feasible.
But then neither is moving the property to a ltd co.

Armitage.Shanks

2,729 posts

100 months

Thursday 21st November 2024
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Peterpetrole said:
MrBig said:
Isn't the usual answer to boot out the tenants from the BTL and live in it for 6 months?
Would still be taxed on the uplift for the whole time she wasn't living there
That's something I didn't know as I had that masterplan down the line. At the end of the day the property has tripled in value, tax is payable on the profit. If CGT can't be avoided that's life, still sounds a nice little earner though.

MattD

195 posts

255 months

Thursday 21st November 2024
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Did she spend any money on improving the property extensions, new kitchen, bathroom, legal fees etc can be deducted from the profit amount to reduce capital gains due

ellroy

7,481 posts

240 months

Thursday 21st November 2024
quotequote all
Can defer the gain by rolling over the monies into EIS, as long as they remain in there, and it remains qualifying, you defer the issue.

Not without risks, not without costs.

Moulder

1,610 posts

227 months

Thursday 21st November 2024
quotequote all
Armitage.Shanks said:
Peterpetrole said:
MrBig said:
Isn't the usual answer to boot out the tenants from the BTL and live in it for 6 months?
Would still be taxed on the uplift for the whole time she wasn't living there
That's something I didn't know as I had that masterplan down the line. At the end of the day the property has tripled in value, tax is payable on the profit. If CGT can't be avoided that's life, still sounds a nice little earner though.
News to me too. How can they calculate that?

If for example I own it for 10 years, live in it for 5 years, is it simply 50% of the uplift that is taxed?

Blanco92

Original Poster:

206 posts

86 months

Thursday 21st November 2024
quotequote all
Thanks for being a sounding board, folks. I put it out there because I couldn't really think of a masterplan either.

To address some of the replies:
- The idea would be to sell it in approx 3yrs time and then buy somewhere for her to live. Not continue renting.
- Monies have been spent on the property. No grand extensions, but the kitchen was renovated. Other than that it has been basic repainting and new floor coverings etc.

I would need to crunch some numbers, but my understanding is to achieve lettings relief she'd have to "officially" live there and to achieve that she'd lose some income as she'd have to keep a room in the property for herself. Can't have your cake and eat it I suppose wink

Blanco92

Original Poster:

206 posts

86 months

Thursday 21st November 2024
quotequote all
ellroy said:
Can defer the gain by rolling over the monies into EIS, as long as they remain in there, and it remains qualifying, you defer the issue.

Not without risks, not without costs.
Sorry, I don't follow. What is EIS?

TownIdiot

3,527 posts

14 months

Thursday 21st November 2024
quotequote all
Blanco92 said:
Sorry, I don't follow. What is EIS?
It's an investment scheme which almost certainly won't be appropriate for her.

TownIdiot

3,527 posts

14 months

Thursday 21st November 2024
quotequote all
Is the house somewhere she'd want to live?

If so she will save the tax by living there. Depending on the value that could be a lot of cash.