Consecutive budgets have introduced measures that affect taxation of the acquisition, management and disposal of properties. Now, more than ever, seeking specialist tax advice is important given the potential savings that could be made by structuring your plans in the most tax-efficient way.
Historically, there have been few tax implications when people bought or sold a property which was their main residence. However, the ownership of multiple properties is increasingly common. The buy-to-let phenomenon, properties being purchased for other family members, relationship changes and inheritances have all contributed. Intra-family transfers and the establishment of trusts also continue to have an effect.
In these situations it is necessary to understand the interplay between the various strands of the complex personal tax regime. These include:
Who receives and is taxed on rental income and at what rate? With investment property, there are special rules for allocating income arising from any property held jointly by spouses or civil partners. You may need advice to establish the expenditure and allowances that can be claimed.
Capital Gains Tax (CGT)
Both the basic (10%) and higher (20%) rates are lower than previously, but pre-existing rates continue to apply in some cases. Are there additional entrepreneur’s and investor’s reliefs to consider?
Stamp Duty (SDLT)
Are you replacing your main residence? The rules on whether you will be acquiring a ‘second’ residential property are not straight-forward and HMRC will take into account interests you or your spouse/civil partner may have in residential property anywhere in the world.
Inheritance Tax (IHT)
To whom will the property pass in the event of your death? Can this potential IHT liability be balanced against other potential tax implications in the shorter term?
Your property transactions should sit within your wider financial planning and it is usually helpful to seek advice at a very early stage. From a tax planning perspective, any elections (such as a private residence election) must be made within set time limits.
If you would like advice on tax issues concerning property, please contact us to make an initial appointment. An average fact-finding meeting and the provision of initial general advice usually takes in the region of one hour, for which we will make a charge of £200 plus VAT.