The Dreaded CGT

Hi Howard

Two questions for you by way of return ……..

Why are you looking to sell?

What alternatives have you explored?

Remortgaging to release cash may still be an option for you, despite your age.

Also, CGT ceases to apply when you are dead. Instead the purchase price of the property becomes irrelevant and your estate is taxed based on the net value, less your IHT allowance. By borrowing and spending or gifting the money you may well reduce the value of your estate.

I suggest you make contact with this guy for a free and confidential discussion about your options >>> https://www.property118.com/member/?id=314
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Hi Howard,

With the greatest respect, I really think you should seek specialist tax advice!

Tax is extremely personal to you and your situation and working with a tax professional can ensure that you are exposed to the least amount of tax.

Hopefully a tax professional may input here, but if not, it’s a false economy imho to ask for this kind of advice for free. You could save thousands by paying a few hundred £££ for bespoke advice to your situation.

Mark has given a recommendation, and I would strongly advise that you speak to a property tax expert like his contact.

Reply to the comment left by “Vanessa Warwick” at “15/06/2014 – 10:28“:

Hi Vanessa,

I agree that Howard should seek specialist tax advice (maybe he already has!).

But surely the beauty of these boards is to thrash these things out. To educate, clarify and confirm, so you can go to a specialist with some knowledge of the subject allowing you to ask the right questions.

A case in point is this parallel thread you’ve also replied to-
https://www.property118.com/trapped-high-gearing-cgt/66488/#comments

Anon is clearly not daft, he has spoken at length to his trusted accountant and yet he has come away thinking he will pay 50% cgt and not the true 28% he should pay. Nearly 30K difference! He can now go back to his accountant armed with the right facts and hopefully make the right decision.

And by exposing it to the world instead of shrouding it as a black art, we can all learn from it (especially me!).

Yes, Monty, 99% of the time I agree with you that forums are for “teasing” out the issues and bringing clarification.

However, in cases like tax, which is HIGHLY personal to the individual, unless a specialist property accountant gives input, I fear that a lot of the information might be confusing or misleading.

Also, as not all accountants are equal, perhaps a benefit of this kind of enquiry is for someone to be directed to a better source of professional advice.

I guess I was trying to say that, in some rare cases, free advice is not the best advice and certainly should not be relied upon as a sole input.

I presume you have seen a tax adviser and that this figure of £45K in CGT is accurate? i.e. it includes all deductions for invoiced maintenance costs, stamp duty and estate agent and solicitor fees, plus four years exemption (1 year occupancy + last 3 years), plus both of your annual CGT allowances (assuming the house is owned in common), plus Lettings Relief? £45K seems a bit high to me, once you include Lettings Relief.

Otherwise a lot depends on what other assets you have and your future lifestyle intentions, but Mark’s suggestion to hang onto the house and let it form part of your estate on death seems sound. Another factor, depending on your overall circumstances, is that the continued income from the property might come in useful if either of you has eventually to move into a home or if you have live-in carers. The returns from letting may be much better than leaving the capital from the sale in a savings account, plus the property may grow further in value as house prices rise. I know this means more CGT to pay, but you still get to keep most of the gain.

Developing the property may be financially worthwhile, and you could just take the view that the extra CGT is a price worth paying. I’m not sure why you would need to move into the property and undergo all the disruption of redevelopment: you already get 1 year + 3 years of exemption, out of the 21 years of ownership, by virtue of your original occupation of the house in 1993. Moving back into the house won’t gain you much in tax terms because extra occupation time would be such a small proportion of your overall period of ownership.

Its the time you lived there plus 18 months . (since April 2014). Not 3 years.

Hello Howard

Mark has provided a link to my profile and with our name in common maybe it’s fate we should meet? 🙂 I am however a mortgage and estate planning consultant and not a tax adviser (I am sure Mark can recommend one of those too) and so with my own ‘skill-set hat’ on I am wondering whether you have any children who can be added as joint owners and who can then (in time?) ‘buy’ the remaining property shares off of you?

This could possibly help with initial CGT (the transfer of equity would only be on a share, so the full gain would not be taxable) and also even IHT planning too (if the transfer takes place now then only the remaining asset in your name would be inherited by them)? As above, this is not formal tax advice, but just a thought for you to explore further?

You could keep the property of course and refinance to the max possible, that way you could release equity and because it’s not being sold so CGT is not relevant anyway.

Howard (Reuben).

As already asked; why do you need to sell?