How to reduce your Capital Gains Tax
Do you own a residential property personally, and plan on selling it in the not-so-distant future? We can help you reduce your capital gains tax!
If you own a residential property personally, and you sell your property, the gain is subject to capital gains tax at 28%, after you have utilised your capital gains tax allowance. – Don’t forget! The capital gains tax allowance has been reduced from £12,300 to £6,000 from the 6th of April 2023.
EXAMPLE 1:
Sales proceed £400,000
Costs associated with sales and purchase -£10,000
Improvements -£40,000
Purchase price -£250,000
-£300,000
Annual exemption -£6,000
Taxable Gain £94,000
Tax Due £26,320
If your property were to qualify as a furnished holiday let (FHL), we would be able to take advantage of business asset disposal relief and reduce the capital gains tax rate to 10%.
The property must qualify as a FHL for at least two years before the business ceased, and the disposal must take place within 3 years of the cessation. Therefore, 2 years of FHL business, allows you to enjoy business asset disposal relief for the entire gain!
EXAMPLE 2:
Sales proceed £400,000
Costs associated with sales and purchase -£10,000
Improvements -£40,000
Purchase price -£250,000
-£300,000
Annual exemption -£6,000
Taxable Gain £94,000
Tax Due £9,400
This results in a total tax saving of £16,920.
If you would like some assistance or advice on how to reduce your capital gains tax contact us today!
Please get in touch on 01273 441187 or book a discovery call with one of our expert accountants.
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Never call an accountant a credit to his profession; a good accountant is a debit to his profession.
Charles Lyell
