23:08 PM, 21st March 2011, About 11 years ago
Guest Blog provided by Steve Sims, author of “Understanding And Paying Less Property Tax For Dummies”.
Little time is left for tax planning as the end of the tax year is nearly upon us – so here are some points to consider before it’s too late from hot topics that have dominated the financial news:
Flipping for property owners avoiding CGT
Expect a change in the rules – the HM Revenue and Customs capital gains tax manual has had a sly update that could herald Chancellor George Osborne announcing changes.
Flipping is the MPs’ favourite tax avoidance scheme where a second home is designated as your main home to take advantage of principle private residence (PPR) relief.
The rule is the last three year’s of ownership for a property where you lived as your main home is exempt from CGT.
The Office of Tax Simplification is known to have reviewed this relief as part of a wider tax brief.
The HMRC manual suggested changing your elected home for just one week would qualify for full PPR relief, but now the manual says a ‘short space of time’ suffices. The problem is the manual does not define a ‘short space of time’, so you no longer know if a week is enough.
Higher rate tax changes
Married couples and civil partners where one partner is a higher rate tax payer (40+%) and the other pays at the lower rate (20% or less) need to look at buy to let property ownership.
Tax code changes mean around 750,000 more people will become higher rate taxpayers from April 6 and they could potentially save thousands of pounds by cheaply switching their shares in property ownership with their spouse.
Inheritance tax reliefs
This is another target for Office of Tax Simplification and a key topic for pre-election promises from David Cameron. The Tories had to trade off an election promise to raise the IHT threshold to £1 million to make a deal with the Lib-Dems.
Expect some tweaking from April 6, so if you have any plans to gift property, cash or other assets, now may well be a good time to act.
If you need a property business check or help keeping financial records and preparing tax returns, a link to Steve’s web-site can be found HERE.