Tax tip – for the property owners amongst you
Where do I live? Simple question you may think, however if you own or are you considering developing a property portfolio, the answer to this question could be the difference between £’s in the bank for you, or £’s being paid to the taxman…
As with most things in life, forward planning is the key to success, in this case, it is the key to minimising any tax due when you come to sell a property or portfolio in future years.
What is Capital Gains Tax (CGT)?
You may have heard the term “Capital Gains Tax”. If not, or you have a limited understanding of what this means, HMRC defines Capital Gains Tax (CGT) as “a tax on the profit or gain that you make when selling or ‘disposing of’ an asset”, in this example we are considering the profit (or gain) on the sale of residential property.
Demonstrating the property as a Main Residence
Assuming a future sale results in a profit, the only way to be fully or even partially exempt from CGT on the sale of your property is to show that it was used as your only or main residence for a period of time. Although the evidence that needs to be collected is circumstantial, you must be able to show that there was an intention (at the very least) to live in the property with some degree of permanence.
With increasing numbers of CGT cases being taken to tax tribunals, the details should not be overlooked and a strategy plan should be put in place upon purchase, ideally, to protect any future gains.