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  • Tax

    BTL to face increase CGT in Ltd Co

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    Learn Change and Adapt ?????

    This is what Nigel Reynolds was talking about here:

    "Up to January 2018 when a company sells an asset the capital gain is reduced by increasing the original cost for inflation since the asset was purchased.  The result of this can be very useful when selling assets through a company.  As an example a property purchased in January 2012 costing £100k and sold in September 2017 for £140k would attract indexation relief of 15.6% so rather than paying tax on £40k (140 - 100) the company would only pay tax on £24.4k (140-100-15.6) which is a sizeable saving.

    We will have to wait for the final wording of the legislation but the indications from the budget speech are that indexation will be available up to January for assets purchased prior to that date but it won;t be available after that date.  This will therefore make it more expensive in CGT terms for properties purchased after that date.  It will still be available for properties purchased before January 2018 but will only cover the period from purchase up to January 2018 so the benefit will gradually diminish as the gains grow."

    This is what the Red Book Budget Document says on it:
    To bring the UK in line with other major economies and broaden the tax base through removing relief for infation that is not available elsewhere in the tax system, the corporate indexation allowance will be frozen from 1 January 2018. Accordingly, no relief will be available for infation accruing after this date in calculating chargeable gains made by companies.

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    _________________________________________________________________________


    The above post is not financial advice, its often me rambling - passing time on a coffee break.
    If you are looking for the Best BTL Mortgage? Call the Specialist Team at Bespoke Finance.


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    Looks like it might be beneficial for LL to take the hit on CGT and SDLT now so they can still benefit from the CGT indexation..

    You will recover the expenditure .......................eventually in years to come providing prices increase.

    Though for many LL in the SE who this change in CGT will mainly affect it is simply unaffordable to incorporate.

    So they are stuck with S24.

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    Not sure thats how it works you still get the benefit up to 2018 from then on its frozen at that rate.

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    _________________________________________________________________________


    The above post is not financial advice, its often me rambling - passing time on a coffee break.
    If you are looking for the Best BTL Mortgage? Call the Specialist Team at Bespoke Finance.


    _________________________________________________________________________

    The calculation is currently based on the level of RPI inflation from when purchased to the date of sale.  Under the changes as they appear from the Budget speech any property purchased pre January 2018 will get an inflationary adjustment on the cost from the date of purchase up to 31 January 2018.  That percentage will not change after January 2018 but will only apply to pre january 2018 expenditure, so if you add an extension or improvement post Jan 18 it won't benefit from any uplift in cost for inflation.

    Regards Nigel

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    Company ownership is not a silver bullet Paul

    It has its draw backs too

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    Learn Change and Adapt ?????

    The problem with that suggestion Paul is how do you find the cash to pay the CGT and SDLT?  As with all tax planning you need to know what the costs and benefits are before you jump in.  It is vital to know what the effect of owning property either personally or through a company will be.  As dislexic says in one of his comments - a company is not a silver bullet.

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     I am a she darling lol x

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    Learn Change and Adapt ?????

    Please excuse my presumption of gender. I did not mean to offend.

    Regards Nigel

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    No offence taken Nigel folk always think I am a fella in here your not the first lol


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    Learn Change and Adapt ?????

    Yes I do understand the cost ramifications

    It is pretty academic as very few could afford to incorporate

    This is why S24 is so sneaky.. It has closed off any escape avenues for SE LL.

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