By Louise Misiewicz
Article relevant to the tax year 2017/18
Are you a buy-to-let property investor and wondering what Capital Gains Tax changes will impact you during 2017/18?
I was talking to a long-term buy-to-let investor client last week at our Nottingham offices about the coming year, and how recent Capital Gains Tax changes might impact his property portfolio in 2017/18.
Our team of property tax experts are on hand to best advise our clients on how to reduce and in some cases mitigate completely tax liabilities, ensuring that their buy-to-let investments are as tax-efficient as possible. The ways we do this are based on individual consultation and ongoing tax planning advice.
Whilst chatting with my property investment client, we discussed the recent Budget and Chancellor Hammond’s decision to abolish relief on Capital Gains.
This will, I believe, have a major impact on any investors holding assets such as buy-to-let properties.
The Autumn Budget announed that indexation relief for companies will be abolished from 01st January 2018, and prior to this a high proportion of gains could be covered by indexation relief which was free of tax.
Individual property investors were in a similar position, until Capital Gains Tax indexation relief was abolished around 10 years ago.
The Chancellor called the indexation relief for companies an ‘anomaly’ but I believe that there have been compelling reasons in the past for keeping it in place.
The main reason was that corporate gains are likely to be taxed again before they reach the individual owners of companies, so a shareholder in a company owning a property will see the company pay corporation tax at 20% on the gain.
If the property investor shareholders have benefitted from the asset, the proceeds have been distributed and taxed as a Dividend, or in some circumstances as a capital gain – for example, if there was a share buy-back, or the property investment company was put into liquidation.
Download our property investment guide here
I’ve advised clients in the past to put buy-to-let property investments into companies to avoid new restrictions on mortgage interest relief (Section 24) – but the recent changes in Capital Gains Tax means that many of my landlord clients are now going through a strategy review with our property tax experts in light of the attack on their property investments. I always advise my property investment clients to seek up-to-date tax advice.
I’ve also written related articles which will provide hints and tips – please see below.
Book your wealth planning session. Let’s address your financial/tax issues and build family wealth that’s sustainable for your future generations.
By now you would have noticed that the number of tax changes means that you need to plan for the future to ensure that you keep more of what you earn.
Property investors: How does Section 24 (mortgage interest relief) affect you? How are your properties going to perform once Section 24 (mortgage interest relief) comes into full effect?
Doctors/Dentists: Have you incorporated your private practice work into a limited company? Have you structured it to ensure that you and your family takes advantage of the tax breaks?
Stephen Covey said that “people climb to the top of the ladder, only to find out that it is set against the wrong wall”.
Many people go about their business and at the end of the year they feel that they have not moved forwards.
The finance, tax and wealth sessions have been designed to review your financial and tax plans for the next five years by reviewing your income streams, lifestyle costs, investment returns, legacy and estate planning needs.
Learn more about my Finance, Wealth and Tax Planning service – Click Here.
Please use the redeem code “CRM25” to get 25% off your next wealth planning call, face-to-face in our Nottingham office.
Some of the previous articles I’ve written around Capital Gains Tax and utilising a Limited Company for property investment purposes are worth reading from the hyperlinks below:
Need accountancy services from a property tax specialist?
Book a call here to suit you to discuss our services and how we can help you