I have several investment properties which I let and I am familiar with using my CGT and personal tax allowance to lower my cgt. However, another investor said that by remorgaging (taking equity out) is allowable against the gain. Is this correct and so if how long do I have to keep the new loan? If this is so to aviod CGT remorgage just before selling
Then you're mistaken. Your personal allowance (£4615) does not apply to capital gains. The CGT allowance (£7900) applies *instead*.
This is rubbish. Loans have nothing to do with gains. Your gain is measured with respect to the starting and final values of the property, not of your equity.
If you buy a house for £5 and sell it for £9 you make a gain of £4.
If you had first borrowed £4 to buy the house (i.e. only invested £1 of your own), then sold it for £9 and paid back the £4 loan, you'd have £5 in your pocket, £4 more than you started with, so it's still a £4 gain.
If before selling you borrow an additional £4 (moving equity out of the house into your pocket), then sell and use £8 of the £9 sale proceeds to pay off the £8 loan, you'd still only have £1 left over to join the four equity pounds in your pocket. You've still made a £4 gain.
In message , Bedford landlord writes
No. Its completely wrong. The loans outstanding against an asset are irrelevant when it comes to CGT.
Correct, the only way Income Tax comes into it is to decide the rate at which the CGT is applied.
"No specific period of time. Less than six months is risky. Repeating the process annually is also risky. You must make it your principal residence. That means (to minimise the chances of your being caught out) removing all your stuff from your parents' place and actually living in the flat. The tax savings makes it worth your trouble to do it right. See to it that your tax return and other tax papers show the new address."
... and pay your council tax from the property of course!
Robert
Bollocks, HTF would they know you had 'removed all your stuff from your parents house'!!
By look at the IR website you can use any surplus personal income tax allowance before the cgt bits
No, you are mistaken. You can only use surplus from the starting and standard rate bands.
If you have *only* earned income, then the first £4615 are free, and the next £1960 are taxed at 10%, and the next £28540 at 22% and the rest at
40%. Interest income and dividend income do benefit from unused PA, but capital gain income does not.If you have *only* capital gain income, then the first £7900 are free, the next £1960 are taxed at 10%, the next £28540 at 20% and the rest at 40%.
If you have *both* earned and gain income, then only income above £4615 is taxed, and only gain above £7900 is taxed, but you can't transfer spare allowances from one to the other. But they do share the 10% band, and earned income is counted first. Any spare £1960 band not used by earned income is available to gain income, and the same is true of spare £28540 band. The order is relevant because of the 22%/20% difference.
Err, no, dividend income doesn't, as you probably know if you think about it!
Sad but true, in 1999/2000 I actually did pay some CGT with some of my income tax allowance unused.
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