Selling Buy to let and CGT

by Readers Question

14:03 PM, 3rd January 2017
About 3 years ago

Selling Buy to let and CGT

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Selling Buy to let and CGT

I would like to sell a couple of long term buy to let properties I own in order to purchase another income producing property in another part of the country (Somerset) where I wish to retire too. conundrum

As I understand it even though I intend to use the proceeds of the sale of my properties towards another similar property I will still have to take the 28% CGT hit.

This will make it untenable. I did get excited last year as I found a site advising that you would not have to pay the CGT if you purchased a similar property within 6 months, only to find out this was a Canadian site !

As far as I can see this CGT liability makes it very difficult for any landlord to ‘upgrade’ his portfolio by selling one or more properties in order to purchase another property, either in another area or perhaps a larger property.

Had the CGT rate been more reasonable at 18% I could probably live with this, but at 28% it seems that I will have to sit tight and carry on as is, as there is no way I am going to accept having to loose over 50k in CGT just to relocate.

Chris



Comments

Karen Holtge

14:21 PM, 28th January 2017
About 3 years ago

I have an idea, but you would need to get the advice of a tax agent. You could invest in an EIS which would then defer the capital gain until the EIS is cashed in. I'm not sure, but I think you can partially cash the EIS such that you release just enough to use up the 18% tax threshold band. You then roll the rest of the EIS, which would defer the other part of the gain. When that EIS matures, the remaining capital gain would be payable, hopefully at the 18% rate. If not, just keep repeating the process. EIS have to be held for 3 years minimum. It does involve taking on the investment risk of the EIS, so do be very careful who you buy it from.

Chris wood

15:53 PM, 28th January 2017
About 3 years ago

Thank you for you info Karen.
The problem for me is that would tie the capital up in the EIS. As I want to use the proceeds of the sale to buy another property it would not work for me.
The CGT I would have to pay would be in the region of £50k, and then on top of that the £25 stamp duty I would have to cough up if I bought an investment property of around £500k would mean I am would be paying £75 k in tax just for the privilege of moving. I'm staying put for the time being ! It is a little ironic that for me, a property crash would be a good thing. If my investment property halved in value I would have a lot less CGT to pay, and the stamp duty would be less as the property I bought would also have reduced in price. Not so good for those wishing to sell their properties to buy a luxury yacht and a Lamborghini !

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