CGT and Exit Planning Strategies for UK Landlords + VIDEO EXPLAINER

CGT and Exit Planning Strategies for UK Landlords + VIDEO EXPLAINER

0:03 AM, 13th December 2022, About a month ago 8

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Are you thinking about selling some of your rental properties next year, perhaps to pay down mortgages or become mortgage free? There may well be Capital Gains Tax consequences associated with this, HOWEVER, there may also be ways to mitigate this tax, which I have explained in the video below.

Good News, Property118 TV is back. This time to discuss CGT and Exit Planning Strategies for UK Landlords. The video is just 11 minutes and 32 seconds in length.

It’s been 13 months since I last published a new video but I’m delighted to announce that I’m back for a short series before I hand over to a brand new presenter. More about that to follow, watch this space!

In this episode, I explore how legislation and the HMRC tax manuals can be applied to facilitate some of the most widely considered exit planning strategies in these most difficult and challenging times for landlords in decades.

Just click on the red button below to start playing the video.

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Comments

Justin Barrington

10:03 AM, 7th December 2022, About 2 months ago

Hi Mark,
Very interesting! I'm still considering this structure for my portfolio.
When the property is sold from the company, I get that there is no CGT to pay. The proceeds and profit are retained in the company. So how do I withdraw the money to actually enjoy it? Surely I will then pay income tax on the full £2m? How much might that be as a higher rate tax payer?
If the property was kept personally, there would be £280K tax, but I would then have the full £2m less £280K to enjoy.
Many Thanks.

Mark Alexander - Founder of Property118

1:58 AM, 8th December 2022, About 2 months ago

Reply to the comment left by Justin Barrington at 07/12/2022 - 10:03
Hi Justin

I'm struggling to follow your maths.

If you were to sell £2m of property you would not have £2m less £280k tax to spend. This because you would also have mortgages to repay.

If you were to sell the whole £4m of property the CGT to pay would be double what you have calculated, ie £560,000 and then you would have to repay the full £1.5m of mortgages. If that's what you want to do the example tax planning strategy explained in this video would not be the optimal one. There would be far better options available for that particular scenario, especially if you wanted to retire to a Country with far more sunshine.

As we always explain, there is no ‘one-size-fits-all’ tax planning strategy.

Shakeel Ahmad

10:27 AM, 8th December 2022, About 2 months ago

Hi Mark,
Hope you are well. intresting vedio on CGT/incorporation.
Section 160 or 162 not sure re partnership incotppration.
I have two question to avoid CGT and stamp duty.
a) Can a sole proprietor benefit from this section or only a partneship ?
b) Are there any lenders who will lend on post incorporation properties. specially where a directors loan account will be created in place of share premium account.
Thanks and Regards

Mark Alexander - Founder of Property118

13:10 PM, 8th December 2022, About 2 months ago

Hi Shakeel

Firstly, the word "avoided" in the wrong word here. No tax is being avoided. CGT is being rolled over into shares and a form of relief exists where a company is purchasing the whole business of a Partnership as a going concern in exchange for shares.

Now to your questions.

a) both sole owners and Partnership can benefit from Section 162 incorporation relief, providing they meet HMRC's 'meaning of business' test of course. However, only Partnerships can benefit from the SDLT relief I have described above.
b) Yes, insofar as I know all lenders will lend where there is a Directors Loan Account. However, I do not understand the second part of your question because I cannot understand why anybody would not have share premium after selling their rental property business to a company in exchange for shares. They might have both though, ie some share premium and some Directors Loans. However, in either scenario that would not affect lending.

FOX30

7:43 AM, 10th December 2022, About 2 months ago

Hi Mark, my wife and I have had to sell two of our 12 properties due to down valuations during remortgages, one flat did not gain much therefore we did not have to use our CGT allowances but the other did.
We haven’t incorporated yet as we don’t need to due to carrying personal losses as well as accumulated 20% credit losses under section 24, however is there a way to mitigate and minimise CGT as the second property has gained more than the first and we stand to pay out a substantial figure for CGT. The property in question was purchased by a deposit produced from another property we still hold in our portfolio to this day ?

Mark Alexander - Founder of Property118

14:49 PM, 10th December 2022, About 2 months ago

Reply to the comment left by FOX30 at 10/12/2022 - 07:43
If you have already used up both of your annual CGT exemption allowances or the sale has already exchanged contracts there is nothing that can be done. I’m sorry this is not the news you were hoping for.

Har Kaur

18:23 PM, 14th December 2022, About a month ago

Reply to the comment left by Mark Alexander - Founder of Property118 at 08/12/2022 - 01:58On the topic of CGT reliefs/deferment; are you able to comment on HS297 Enterprise Investment Scheme and Capital Gains Tax (2019). Investment in an eis in order to defer CGT. Is it possible to fund purchase of an onward buy to let with this method?

Mark Alexander - Founder of Property118

21:52 PM, 14th December 2022, About a month ago

Reply to the comment left by Har Kaur at 14/12/2022 - 18:23
No it isn’t

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