Time to plan
The property market has been challenging for owners over the last five years or so, but values are beginning to edge up once more. This means that the time is right for some pro-active tax planning. Without taking action now, any profit you make from a sale will be subject to Capital Gains Tax (CGT) of up to 28%.No planning
You could just sit back until the time comes to sell. As long as you don’t make any other capital gains in the same tax year, your annual exemption (currently £10,900) will reduce the amount on which you have to pay tax. But the maximum tax you’ll save, at today’s rates, would be £3,052 (£10,900 x 28%).Standard planning
The next step you could take is to transfer a share in the property to your spouse before the sale.Tip. This doesn’t trigger any CGT and doesn’t have to be done until the last minute. Therefore the proportion of the property you transfer can be tailored to fit the circumstances.
Example. Several years ago Jack, a higher rate taxpayer, bought a commercial property for £200,000. In June 2013 he accepts an offer for it of £300,000. If he sells it in his own name he’ll pay tax at 28% on £89,100 (£100,000 gain less his annual exemption), i.e. £24,948. Gill, his wife, is certain to have no income or gains for 2013/14. By transferring a 72% share of the property to her, their joint CGT bill will be reduced to £18,695.