9:03 AM, 5th January 2022, About 2 years ago 11
I am a high rate income taxpayer with 3 Buy to Let properties in my sole legal name. All three properties have an outstanding mortgage on them. I am a UK citizen married to a US Citizen, we are both UK residents. My spouse and I both own a Ltd company.
My spouse takes a very small salary from our Ltd company, which keeps his tax situation to nil. He has no other employment. I don’t take any salary from our Ltd company, but I am employed by another company and pay the highest rate of income tax. I also currently declare all the rental income from my properties and of course pay income tax on the rents at the higher rate.
I want to sell all three buy to let properties in the tax year 2023 – 2024 and so want to act now ahead of tax year 2022 – 2023 to help reduce Capital Gains Tax when I come to sell. I also want to reduce income tax on the rental income for 2022 – 2023 tax year.
My question is what is the best way to do this, minimising Stamp duty, CGT and other taxes? Can I use a deed of trust to transfer the “benefit” of the properties to my spouse or our Ltd company ahead of April 2022 whilst remaining the sole legal owner? Will this mean that when it comes to selling the properties, my spouse or the business would pay CGT at their rate on the full taxable gain since the original purchase of the properties or will they only pay CGT on the taxable gain since they became the beneficiary and I must still pay CGT on the taxable gain from the original purchase date to when we signed the Deed of trust?
Finally, are there benefits to transferring the benefit of the properties to our Ltd company now and then selling them in 2024, or would it be better to transfer the benefit to my spouse? I understand there is no GCT to pay if I transfer benefit to my spouse, but not sure if stamp duty is payable or what might be the benefits or disadvantages of making our ltd company the beneficiary.
The total taxable gain on the properties is around $300,000 today, the total sale value of all three properties would be around £750,000 in today’s market and there is currently around £310000 in mortgage to be paid off when we come to sell. Obviously, these numbers will change over the next two years.