CGT v Corporation Tax

[Marc Barnes]

Hi, quick tax question for the people far more knowledgeable than me!

i understand that an individual when selling a BTL property will pay capital gains tax - on the gain (excluding my allowance). i am a higher rate tax payer, so i understand this would be at 28%.

if i hold a property within a ltd company and then sell it, i pay corporation tax - can someone tell me what the rates (%) are and is there such a thing as an allowance, like there is with CGT??

Many Thanks

Marc

 

[Debbie Franklin]

There is no allowance but the company pays corporation tax on the gain currently 19% but will fall to 17%.

There used to be indexation which would increase the cost by inflation but this is only available up to January 2017.

[Kent614]

Can the LTD company losses be off set against capital gains to reduce the taxable profit? 

[Debbie Franklin]

yes unless the property business ceased in the previous period 

[Marc Barnes]

Thanks Debbie, so as an example, if i have sell a property and my gain is £22000 and i hold this in my own name, i will get my CGT allowance of £12,000 and pay 28% on the remaining £10,000 i.e. £2,800.

If i hold this property in a Ltd Company, and my gain is £22,000 -  i would pay corporation Tax (soon to be 17%) on the £28,000 i.e. £3,740.00

Purely from a 'sale' and 'tax' perspective have i missed anything?

 

[Debbie Franklin]

Pretty much it unless you have losses you can use or if the property was owned by the company prior to 1 January 2018

Deb

[Marc Barnes]

Thanks Deb.......

[Conrad_Paton]

Hi Marc,

Debbie has explained the tax difference very well. Dont forget if you are drawing cash out of a Ltd company you are liable for income tax on directors dividends and/or payroll over certain amounts.

Top Tip...if you are looking to re-invest, mortgage companies do not recognise CGT as an income, but dividends and payroll count for affordability studies etc. You're on the higher earning income tax rate anyway, so affordability may not be an issue for you. 

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