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Tax Planning Ideas For Property Owners

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Could the following tax planning idea reduce BTLers' tax liability???

Let's assume you dispose of your main residence, whether by gift or sale, and move into your second BTL property (having evicted the tenants first of course).

Is it correct that you do not pay any capital gains tax on the gain from your mian residence, since the gain qualifies for Principal Private Residence relief? So if you bought your house in year 2000 for £200,000, and you now sell for £400,000, that gain of £200,000 is not taxable, right? And if that is so, the tax saving to you is £56,000 (if you are a higher rate tax payer).

Second, is it correct that by moving into your second home, that home now becomes your main residence? So after 12 months of occupation, your second home automatically qualifies for 4 years of Principal Private Residence relief (last 36 months of ownership automatically qualify for PPR relief on any primary residence, is that correct?

Assuming that is correct, if your second home was also bought for £200,000 in year 2001, and you sell in year 2011 for £400,000, your gain of £200,000 is taxable only as to 6/10ths (since 4/10ths qualify for PPR relief), right?

In other words, your taxable gain is £120,000 (the gain is divided equally over the period of ownership, right?) not £200,000.

In addition, the BTLer can deduct his/her annual CGT allowance of £10,100, leaving £109,900 taxable, right?

And if your second home is owned jointly with your partner/wife/husband, you could deduct his/her annual CGT allowance also, reducing the gain to £99,800, right?

So, assuming all that is correct, that is a tax saving of £28,056 in 12 months on the second home, plus £56,000 on the first home (to be used to purchase another investment home, while moving into third home to trigger PPR relief, and so on and so forth).

Disclaimer: this post is nothing more than a list of questions and assumptions on an internet forum. Whoever wants to save tax, must get independent legal advice.

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Could the following tax planning idea reduce BTLers' tax liability???

Let's assume you dispose of your main residence, whether by gift or sale, and move into your second BTL property (having evicted the tenants first of course).

Is it correct that you do not pay any capital gains tax on the gain from your mian residence, since the gain qualifies for Principal Private Residence relief? So if you bought your house in year 2000 for £200,000, and you now sell for £400,000, that gain of £200,000 is not taxable, right? And if that is so, the tax saving to you is £56,000 (if you are a higher rate tax payer).

Second, is it correct that by moving into your second home, that home now becomes your main residence? So after 12 months of occupation, your second home automatically qualifies for 4 years of Principal Private Residence relief (last 36 months of ownership automatically qualify for PPR relief on any primary residence, is that correct?

Assuming that is correct, if your second home was also bought for £200,000 in year 2001, and you sell in year 2011 for £400,000, your gain of £200,000 is taxable only as to 6/10ths (since 4/10ths qualify for PPR relief),

In other words, your taxable gain is £120,000 (the gain is divided equally over the period of ownership, right?) not £200,000.

In addition, the BTLer can deduct his/her annual CGT allowance of £10,100, leaving £109,900 taxable, right?

And if your second home is owned jointly with your partner/wife/husband, you could deduct his/her annual CGT allowance also, reducing the gain to £99,800, right?

So, assuming all that is correct, that is a tax saving of £28,056 in 12 months on the second home, plus £56,000 on the first home (to be used to purchase another investment home, while moving into third home to trigger PPR relief, and so on and so forth).

Disclaimer: this post is nothing more than a list of questions and assumptions on an internet forum. Whoever wants to save tax, must get independent legal advice.

Wrong website.

Try here :rolleyes:

Edited by salamander

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Could the following tax planning idea reduce BTLers' tax liability???

Let's assume you dispose of your main residence, whether by gift or sale, and move into your second BTL property (having evicted the tenants first of course).

Is it correct that you do not pay any capital gains tax on the gain from your mian residence, since the gain qualifies for Principal Private Residence relief? So if you bought your house in year 2000 for £200,000, and you now sell for £400,000, that gain of £200,000 is not taxable, right? And if that is so, the tax saving to you is £56,000 (if you are a higher rate tax payer).

Second, is it correct that by moving into your second home, that home now becomes your main residence? So after 12 months of occupation, your second home automatically qualifies for 4 years of Principal Private Residence relief (last 36 months of ownership automatically qualify for PPR relief on any primary residence, is that correct?

No, because the period of occupancy overlaps with the last three years, you only get the last three years.

Assuming that is correct, if your second home was also bought for £200,000 in year 2001, and you sell in year 2011 for £400,000, your gain of £200,000 is taxable only as to 6/10ths (since 4/10ths qualify for PPR relief), right?

In other words, your taxable gain is £120,000 (the gain is divided equally over the period of ownership, right?) not £200,000.

In addition, the BTLer can deduct his/her annual CGT allowance of £10,100, leaving £109,900 taxable, right?

And if your second home is owned jointly with your partner/wife/husband, you could deduct his/her annual CGT allowance also, reducing the gain to £99,800, right?

So, assuming all that is correct, that is a tax saving of £28,056 in 12 months on the second home, plus £56,000 on the first home (to be used to purchase another investment home, while moving into third home to trigger PPR relief, and so on and so forth).

Your calculation is correct for 4 years - yes.

But no-one considers CGT on your main home as Tax saved so the only tax you are saving is that on the two years of the second home when you weren't in occupancy

tim

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  • 152 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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