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  • Tax

    Capital gains

    Am I right in thinking that the capital gain from the sale of a buy to let property is treated separately as far as tax is concerned and not just lumped together with regular income so pushing me into a higher tax bracket?
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    No, it's taxed on top of any income. 10% or 18% for any gain still within basic rate band and 20% or 28% in higher rate or additional rate
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    Correct, it's treated differently and you have a CGT allowance of £12k as well.

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    No it's taxed at different rate but is added to income
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    Yes the CGT rate is dependent on your marginal income tax rate.
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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022


    After taking off allowable expenses and your personal CGT allowance the balance of the gain is added to your income to determine if tax at 18% or 28% is due - for property - 18% up to the higher tax rate and then 28% above this.  If the gain takes your total income - earned plus capital gain - from the basic rate band to the higher rate band then you will pay some CGT at 18% and some at 28%.
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    Thank you all for taking the time to reply and Essex for the breakdown most useful.
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    so presumably the capital gain is added to the income and thus can push you over the threshold?

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    Yes, it can. The higher rate band this year (2019/20) is £50,000. If you had income of £40,000 and a capital gain of £20,000 after the annual exemption is deducted, all of your income is in the basic rate band. Your capital gain would, however, leave £10,000 in the basic rate of capital gains tax, and £10,000 at the higher rate.

    Kind regards,

    RITA4Rent

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    RITA4Rent (Rental Income Tax Advisors)

    Specialists in Landlord Taxation

    Recommended tax advisors of the Residential Landlords Association

    Follow us on Twitter @Rita4Rent

    clients (at) rita4rent (dot) co (dot) uk

    http://www.rita4rent.co.uk


    I went armed with the CGT information to my accountant who tells me I am wrong!

    Is it time to change accountants i wonder.

    My partner and I had originally set out to build a small portfolio of B2L's  by buying run down properties renovating them to add value and sell one keep one refinancing as we went. Pretty common business plan which was derailed with the changes to stamp duty and the tax legislation. We formed a limited company 2/3 years ago no longer using the partnership to buy property and just kept two rentals in the partnership. We then decided to sell  the rental property owned by the partnership and have now completed on the sale this has led to the CGT questions.

    I have now been told the proceeds will be treated as income and taxed accordingly as we are considered 'trading' and not eligible for any CGT allowance.

    Is this correct?

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