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Advice on Capital Gains tax (and how to avoid it)(6 Posts)
We have recently sold a second property which we bought as an investment to rent out. We bought it 4 years ago and have made a substantial profit by selling it. What we probably want to do with the money is buy more property and rent it out. As far as I know we are liable for 40% capital gains tax on our profit. Someone told me that if we reinvest it straight away we could avoid the tax but I have since been advised this is not the case.
I just wondered if anyone had any ideas of what we coud do with the money and hopefully avoid the tax or if not substantially reduce it as it is a large amount. Both me and dh would be grateful if anyone out there has any ideas on this - thanks .
You can only postpone the CGT (not avoid it) if you invest in certain unquoted high risk companies.
Did you ever live in the property as your main home? If not you will probably be liable to capital gains tax?
Also is it jointly held? If so have you sold any other assets in the same tax year - if at a loss you may be able to offset, if at a profit you may have already eaten in to your tax free cgt allowance.
Go and see local accountant and they should do the figures for you - try and get them to give you a fixed fee quote - that's what I do ( I am a tax consultant). Unless it's huge sums involved (hundreds of thousands of pounds)I would avoid the large accountancy firms as you will pay an arm and a leg in accountancy fees.
No specialist I'm afraid, but i think if its jointly held you split the profit between you so only pay tax on over c.7000 profit each. I don't think there is any way to avoid paying it apart from if you have lived in the house as your main home (or can claim it as such in certain circs - eg if you are currently living in tied accomodation), in which case you avoid all or most of the tax. Congrats on your profit by the way! Also remember that you can offset any expenses you spent on doing up the house against the capital gains tax I believe, so you are only paying on actual profit. I hope you kept receipts??
We didn't live in the house as our main home. It was a property of multiple occupancy (containing 5 separate flats). We have kept all our receipts though so that is one thing, so we can offset our expenses. Our actual profit was £110,000 which is brilliant. It is a gamble we took which obviously paid off, although I have had quite a few sleepless nights over the past few years worrying whether I had done the right thing. I now want to reinvest, well at some point this year, and I just wanted to see if there was anyway I could lessen the tax bill. Dh already pays a huge amount of tax with his job and is away from home for weeks at a time, plus I also pay tax with my job. I know I have to pay some tax on this, it just seems such a huge amount as this was such a big gamble for us.
The main thing we want to do is invest on our retirement and secure our childrens future.
BTW I meant to say thankyou very much for your advice. Got distracted by the phone.
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