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My mother in law, who is 93 years old has now come to live with us as she was no longer coping on her own. My husband (her son) is the only child. She has a will which leaves her property to him. Due to the circumstances she would like to gift the house to us now, which we would then like to rent out. We also however, need to make some improvements to our house to help accommodate her needs therefore we want to release some equity from her property. Facts: there is no mortgage on her property which is worth roughly £400,000 we need to release the equity as soon as possible we need roughly £75,000 released Delimma and confusion: our mortgage advisor has sorted out a Buy to let mortgage (Nat west) which allows us to purchase her property for £75,000 ( under market value). This the. allows us access to the equity immediately. Confusion: in the future, if we decide to sell the property, would the capital gains tax be on the price we purchased the property (£75,000) or the price the property was worth at time of sale (£400,000)? By making this transaction we are also having to pay stamp duty on the £75,000 as well as solicitors fees etc. I am on the understanding that if she gifted the house to us we would have to wait at least 6 months before we could remortgage it? Is this correct? Is there any other way we could make this transaction more cost effective? Many thanks

Hi there, I wonder if anyone had an opinion on using ones CGT allowance when flipping a property. My accountant has said I should avoid using this allowance when buying a property with the intention to sell it (flip it) once refurbished as the profit made from the sale are income and not a Captial Gain. Does anyone have any experience with this? If treated as income tax, I am going to move the property into a Ltd Company (it is mortgage free) and take the Corp Tax hit. That way building up some history in the Ltd Co which commercial lenders like to see. Apologies if this topic is covered elsewhere. if it is please point me in the right direction. Thank you Alistair

Hi all, My siblings and I are the only beneficiaries in our father's will and are due to receive various assets including two properties, and a portion of another property. We are assessing our options with how to administer the estate, and have two options: 1. Receive all assets as per the will and be subject to IHT. 2. Step aside as beneficiaries and allow all assets to pass to our mother, meaning no IHT due as they were married. My mother would then gift the assets to us in full. Thinking specifically of the properties, I am hoping that as they are mortgage free there would be no stamp duty payable, and also no capital gains tax due as they will be signed over to us straight after she receives them and thus no capital gain - is this correct? Then thinking into the future, if we were to let out the properties for a few years then sell, am I right in thinking CGT would be due on the difference between their value at the time they were gifted to us and their sale price? Or would the entire sale value be subject to CGT as they were signed over to us for free? It seems that option 2 is the best option in any case, but if anyone could provide any guidance as to our position on stamp duty and CGT if we were to take that option, and let me know of anything I might be missing from the equation... I would be hugely appreciative. Thank you. TDH

So my brother currently owns a property with a JV partner and they are looking to sell. They currently have around £140,000 equity in the £280,000 property (50% LTV). They bought the property for £155,000 with a £30,000 deposit. If they were to sell now they would take approximately £140,000 out of the property (not including fees). If i understand it correctly this gives them a capital gains profit of £110,000 (£55,000 each). The question is, if they remortgaged to 75% LTV. Releasing £70,000 tax free and then sold the property later for the same amount they would receive £70,000, giving them £40,000 in capital gains (£20,000) Is this legal/ethical? and if not what can he do to minimise his exposure to capital gains tax? I hope that all made sense. Numbers in brief Property value - £280k Equity - £140k Intial deposit - £30k Option 1 - Sell and receive £140k (£110k capital gain) Option 2 - Remortgage out £70k sell and receive £70k (£40k capital gain)

Hi all, I may have asked this before as it has been an ongoing issue but I am looking to see if anyone knows why I am struggling to find a lender who is happy to touch ExPats who live in Australia for a remortgage. It wasn't an issue before as I have tapped equity in this property twice in the last 5 years but now it seems to be a big issue. I have plenty of equity at about 55% LTV which I could easily use to carry on building a portfolio if I could only release it. I guess second question might be that if I sold the property to release the equity what capital gains tax might I be up for. I lived in the property for about 10 years out of the 15 that I have owned it. Thanks Paul

I have a question regatding what was said in the video titled; SHOULD YOU USE A LIMITED COMPANY TO INVEST IN PROPERTY? Rob mentioned in that video that anyone who has 8+ properties with no mortgage should consider going down the Ltd company route as there is less capital gains tax (CGT). II have the following questions; -Does that mean incorporating less than 8 properties means you pay more CGT? -Does that mean only those with 8+ properties get incorporation relief? I thought anyone can get incorporation relief as long as they trade their property for shares. -Is there evidence for what was mentioned in the video. I couldn't find this on a government website. Thanks in advance for all responses.

I'm about to set out on the journey of property investment. My goal is to have 3 BTL properties of my own by the end of 2017. I have a home at the moment, worth 220k. Bought for 180k, two years ago. I would like to move out and buy a a smaller residential home, and start to let out my current one. I am trying to figure out the best way of doing it via a limited co. I have the opportunity to borrow deposit money or possibly the total amount from another company I am a Director in. My new company will buy the property from me (either outright or on a BTL mortgage). I am wondering whether to buy at full market value, and earn the profit tax free on my residential home, or buy it at a lower than market value and pay less stamp duty in the short term. The benefit of the first idea is that I pay tax at a rate of 40% so this is a massive incentive to have some capital, tax-free for once. The company will only pay tax at 20% however and that is after tax deductible expenditure. The company might benefit from having that equity injection when it comes to refinancing and inflation. I think my next step is to get to meet up and explain my idea to some experts! My head is in a spin!

Hi folks, thought I'd try posing a complex tax question to you clever lot after having read some incredibly in depth advice given on other threads. You may want to get a cup of tea first... Circumstances: Grandparent (A) has left 75% estate to only child (B) and 25% split to grandchildren (C + D). The IHT has been paid and probate granted leaving in the estate a mortgage-free London home that is currently let out. Ownership is still up in the air. Immediate Aims: B wants to keep the property for the income and pay off children C + D by raising a 25% LTV mortgage (75% equity). C + D want this too. For this to happen, B can fill out an Assent Form, get a mortgage, pay stamp duty (SDLT) on that 25% and transfer the mortgage monies to C+D. Problem: B doesn't relish paying The SDLT (about £9k) but it's not such a big issue and could possibly instead pay C + D out of own pocket and then be reimbursed from mortgage without 'buying out' other two beneficiaries C + D and so avoid the SDLT? (question 1). However, the biggest stumbling block is that major IHT will be due when B eventually dies, payable by C + D. Problematic Solutions: 1. B could do a deed of variation (Ed Miliband style) to A's will to move property to C + D now but would then forego the income (and the equity), so wouldn't achieve the main aim. 2. By holding on to the property until later in life B could then gift the property to C +D but would 1. forego income in last years, 2. probably get the 7 year timing wrong and 3. would also pay CGT for any uplift in property price between now and date of gift. Idea: A LTD company is set up now and the property is transferred into it instead of to B perhaps by a deed of variation to avoid SDLT on the whole worth of the property (question 2). My understanding is that because the LTD company would be an investment company i.e. holding an asset, it wouldn't be eligible for Business Property Relief (BPR) and therefore the IHT bites again (question 3). So then an employee benefit trust (EBT) is set up for C + D and e.g 90% of the LTD company's shares are transferred to it which makes those shares IHT free due to BPR while B retains the e.g. 10% share of the LTD company and maintains control and income. Any further info on EBT would be very welcome (question 4). Downsides: 1. one for Income Tax (IT). B is lower rate taxpayer and outside a company would pay 20% of rental profits but inside would pay 20% corporation tax (CT) then would have £5k free a year in dividends and then 7.5% dividends tax. As CT is set to go down to 17% by 2020 and the first £5k is tax free, overall tax would probably be around 22%, i.e. 2% more by having property in a company so not really a big deal. The upside is that should B wish, income tax could be left in the company for C + D to inherit. 2. C + D, whilst doing well out of the above strategy, still require their 25% (12.5% each) sooner rather than later so an LTD company BTL remortgage would need to be raised to pay them. Clearly there are, whilst growing, fewer lenders for ltd companies and higher rates. The low LTV of 25% however should help in this regard but clearly this needs to be factored in as well as looking at their criteria for lending. However, the mortgage monies, I presume, would be paid into the company rather than to C + D directly so how could this money get paid out without being subject to dividend taxes (question 5). Well, that is pretty much as clear as I can make it . I'm aware there's a big having your cake and eating it element to this and there are probably stumbling blocks but it's a problem many people seem to have so hopefully it will help others out there. Alistair

I'm a Director for a property consultancy specialising in Compulsory Purchase. CGT roll over relief is available for CPO cases in certain circumstances, even for residential properties. We are looking for an accountants in London to do us an advice note on the subject that we can send to clients. We're happy for the company to advertise their own services in the advice note and because of that we're not looking at paying a fee for the provision of the note. If you're an accountant and interested, please e-mail danknowles@sawyerfielding.co.uk.

The problem — 28% CGT is a lot of tax to pay I wrote an extensive article about the budget changes and how many residential property investors, especially higher rate taxpayers, have been targeted by George Osborne in the following ways: The reduction of mortgage interest relief to a basic rate taxpayer level of 20% The removal of the 10% wear and tear allowance The new 3% stamp duty land tax (SDLT) surcharge for additional properties There are many other issues identified within the article but the above three “features” can be crushing to the point where you can make a loss on your property portfolio and still pay tax. This, in my opinion, is wrong but we have to work with it or leave the sector. If you are thinking of leaving the residential property investment market then you need to consider capital gains tax (CGT). George Osborne also recently announced that CGT rates will be decreased from 18% to 10% for basic rate taxpayers and from 28% to 18% for higher rate taxpayers. On the face of it, you may think this is good news, but the devil in the detail reveals that George has singled out residential property investors again and stated that these discounts do not apply to them. Therefore residential property investors will still pay 18% CGT if they are basic rate taxpayers and 28% CGT if they are higher rate taxpayers. You could be forgiven for feeling rather paranoid about these tax changes and the way the government seems to be targeting landlords. Don’t forget, however, that each person still gets an £11,100 capital gains exemption for 2016-17. Ways to minimise your CGT liability The below list is based on non-trading assets, i.e. residential property investments. There are other allowances that may be claimed for trading business assets, which I have detailed in another article. Use your spouse’s capital gains exemption and allowances using a deed of trust Spread the property sales over time to utilise your annual capital gains exemptions Contribute towards your pension to get income tax relief to reduce the overall tax burden Invest in Venture Capital Trusts (VCTs) Invest into an Enterprise Investment Scheme (EIS) Invest into a Seed Enterprise Investment Scheme (SEIS) Many property investors do not use their spouse’s capital gains exemptions. You may be in a position where you are a higher rate taxpayer and your spouse either pays no tax at all or is a basic rate taxpayer. As such you could be losing out on their £11,100 capital gains exemption and paying 10% more tax than you need to. There is a way to split the percentage of ownership to ensure that you utilise your personal capital gains exemption while minimising the percentage of CGT payable. I would suggest that you speak with your accountant about this. If you spread your property sales over time then you could take advantage of the £22,200 in capital gains exemptions (assuming you are married) available each year. If you invest the entire gain into one of the last four options then you would be able to mitigate the entire CGT liability, provided you meet the various requirements identified within each type of investment. Please note that I am not suggesting that you invest in any type of investment specifically, rather showing the tax reliefs that may be obtained if you choose to do so. There will be a degree of risk with any type of investment, which is mirrored by the below income tax reliefs. The higher tax relief often relates to the additional risk you take. You should speak with an FCA regulated financial adviser before embarking on any investment. Income tax reliefs for each type of investment In addition to the CGT mitigation, you will also receive income tax relief on the investment that you make as follows: 30% income tax relief for VCT investment up to a maximum investment of £200,000 30% income tax relief for EIS investment up to a maximum investment of £1,000,000 50% income tax relief for SEIS investment up to a maximum investment of £100,000 Please note that pension contributions will also provide you with income tax relief — my previous article provides more details on this. I also wrote a more detailed article on investing in EIS.

Are you looking to sell a property and are you worried about capital gains tax (CGT)? Was it once your main home and if so, would you move back into the property? The problem — 28% CGT is a lot of tax Given the recent budget changes you may be thinking about selling one or more investment properties. The unfortunate thing is that as property prices increase — if that can be considered unfortunate — then so does the CGT payable when you sell and if you’re a higher rate taxpayer you’ll pay 28% on any gains. Let me first state that each person owning the property will get an annual capital gains exemption of £11,100 for the year 2016-17. If you are married and the property is in one person’s name only, then it is a good idea to use a deed of trust at least a day before the sale so that you can claim two allowances (couples only). If this is applicable to you please read my article on this. I previously wrote an article about Private Residence Relief (PRR), which demonstrated that tax is only chargeable on the periods that you were not living in the property. I also outlined a number of reliefs as follows: 0% tax on the time you lived in the property 0% on the last 18 months of ownership (deemed to have been living there even if rented out) You would also get lettings relief as shown below (the lower of): the amount of PRR already calculated, or £40,000, or the amount of any chargeable gain you make because of the letting (calculated as a fraction of the gain – the fraction being the period of letting/divided by the period of ownership). This will help you to significantly reduce your CGT liability. Example: You bought your house in December 2002 and sold it in December 2015, owning it for 13 years. You lived in the property as your only or main residence from December 2002 to December 2008 (six years). It was then let as residential accommodation from January 2009 to December 2011 (three years) and then empty until sold at a gain of £150,000. You are entitled to PRR for seven-and-a-half years (six years of residence plus the final 18 months) out of 13 years. This part of the gain is £86,538 (7.5/13 x £150,000). Your remaining gain is £63,462. The lowest of the three limits set out above is the gain by reason of the letting £34,615 (3/13 x £150,000) so you are entitled to further letting relief of £34,615. Your chargeable gain will be £28,847. Move back into the property to get additional reliefs You can also reduce your CGT liability if you move back into a property which you previously had as your main home. If you have another dwelling house eligible for relief, for example, a house or flat which you bought or rented as your home while absent, you will need to make a nomination in favour of the original dwelling house, if you want the period of absence to be treated as a period of residence at that house. The qualifying periods of absence are: a. absences for whatever reason, totalling not more than three years in all b. absences during which you are in employment and all your duties are carried on outside the UK. The distance from your place of work prevents you living at home, or your employer requires you to work away from home in order to do your job effectively c. absences totalling not more than four years when the distance from your place of work prevents you living at home or your employer requires you to work away from home. You will keep the exemption for absences b. and c. if you cannot return to your house afterwards because your existing job requires you to work away again. The absences at b. and c. will also apply if the employment was that of your spouse or civil partner. Example: You bought a house in 1984 and used it as your only or main residence. In 1985 your employer required you to work abroad and you did not come back to the house until 1990. You lived in the house again as your only or main residence until you sold it in 2013. You are entitled to full relief.

Are you looking to sell a property and are you worried about capital gains tax (CGT)? Was it once your main home and if so, would you move back into the property? The problem — 28% CGT is a lot of taxGiven the recent budget changes you may be thinking about selling one or more investment properties. The unfortunate thing is that as property prices increase — if that can be considered unfortunate — then so does the CGT payable when you sell and if you’re a higher rate taxpayer you’ll pay 28% on any gains. Let me first state that each person owning the property will get an annual capital gains exemption of £11,100 for the year 2016-17. If you are married and the property is in one person’s name only, then it is a good idea to use a deed of trust at least a day before the sale so that you can claim two allowances (couples only). If this is applicable to you please read my article on this. I previously wrote an article about Private Residence Relief (PRR), which demonstrated that tax is only chargeable on the periods that you were not living in the property. I also outlined a number of reliefs as follows: 0% tax on the time you lived in the property 0% on the last 18 months of ownership (deemed to have been living there even if rented out) You would also get lettings relief as shown below (the lower of): the amount of PRR already calculated, or £40,000, or the amount of any chargeable gain you make because of the letting (calculated as a fraction of the gain – the fraction being the period of letting/divided by the period of ownership). This will help you to significantly reduce your CGT liability. Example: You bought your house in December 2002 and sold it in December 2015, owning it for 13 years. You lived in the property as your only or main residence from December 2002 to December 2008 (six years). It was then let as residential accommodation from January 2009 to December 2011 (three years) and then empty until sold at a gain of £150,000. You are entitled to PRR for seven-and-a-half years (six years of residence plus the final 18 months) out of 13 years. This part of the gain is £86,538 (7.5/13 x £150,000). Your remaining gain is £63,462. The lowest of the three limits set out above is the gain by reason of the letting £34,615 (3/13 x £150,000) so you are entitled to further letting relief of £34,615. Your chargeable gain will be £28,847. Move back into the property to get additional reliefsYou can also reduce your CGT liability if you move back into a property which you previously had as your main home. If you have another dwelling house eligible for relief, for example, a house or flat which you bought or rented as your home while absent, you will need to make a nomination in favour of the original dwelling house, if you want the period of absence to be treated as a period of residence at that house. The qualifying periods of absence are: a. absences for whatever reason, totalling not more than three years in all b. absences during which you are in employment and all your duties are carried on outside the UK. The distance from your place of work prevents you living at home, or your employer requires you to work away from home in order to do your job effectively c. absences totalling not more than four years when the distance from your place of work prevents you living at home or your employer requires you to work away from home. You will keep the exemption for absences b. and c. if you cannot return to your house afterwards because your existing job requires you to work away again. The absences at b. and c. will also apply if the employment was that of your spouse or civil partner. Example: You bought a house in 1984 and used it as your only or main residence. In 1985 your employer required you to work abroad and you did not come back to the house until 1990. You lived in the house again as your only or main residence until you sold it in 2013. You are entitled to full relief. Next steps — contact us to minimise your CGT liabilityIf you want to understand how to implement this strategy or to discuss other finance/tax questions then please book some time with us using the below calendar. Please use the redeem code “Article 33” to get 33% off your next consultation call. If you are looking for a new accountant then please book some time with us using the below calendar. Please note that this booking is to describe our services and will not be used to discuss your personal tax affairs.

Budget announcement – March 2016 What has changed? Corporation tax – Corporation tax will eventually drop to 17%, which is significantly lower than basic rate tax bracket of 20%. Tax bands: – Personal Allowance will increase to £11,500, and the higher rate threshold will rise to £45,000 in April 2017 Read about more of the changers in this article - http://www.optimiseaccountants.co.uk/budget-announcement-march-2016v2-2/#.VwN_URMrJE4

Hi, I have been trying to source a property and a mortgage for a few years now as I have the money to put a deposit on a BTL property. It took me a very long time and a few mortgage brokers but I have now got a mortgage offer and I'm ready to place an offer on a property. However, my problem is that as I want to start investing in property ASAP I'm only 21 years old and a university student with very little earnings - only part time work while at university. My mum has agreed to have her name used on the mortgage to buy the property but I will be providing deposit and costs of getting it rented out. Basically it will be 100% mine but 100% not mine on paper as her name would be on the mortgage and on the deeds. I cant see any problems with this in the short term but I'm worried about what might happen in the long term. For example if it was transferred in my name in the future the level of capital gains tax and if it is sold in the future the level at which it would get taxed and how that money would legitimately be able to be passed onto me. Hopefully someone on here can help with a long term strategy. Thanks, Matt