22nd
Aug 2016
Landlords can get away with having to pay the higher rate of Capital Gains Tax by opting to reinvest their gains for a certain period of time.
The ex- Chancellor’s money grab from landlords included the introduction of a higher capital gains rate when selling buying to let properties. The basic rate stands at 18% however the higher rate is 28%, in spite of other investors paying 10% or 20% on their gains.
There is some good news for landlords with the uncovering of a tax loophole that allows them to plan their tax matters ahead and thereby not having to pay the 28% rate.
Landlords Enterprise Investment Scheme (EIS) may be the solution that some landlords could seriously consider by opting for deferral relief on the capital gain, which will reduce the CGT 28% rate to 20%, and income tax relief at 30% of the money invested in the scheme up to £1million.
The Enterprise Investment Scheme’s rules offer deferral relief in capital gains no matter how long shares in a company, that reaches certain rules set the EIS, are held which could be twenty four hours or the standard EIS term of three years.
It is imperative that landlords do not mistake this for the Seed Enterprise Investment Scheme as it does not offer the same capital gains referral as the EIS.
For landlords to make sure that they can sidestep the higher CGT, then they must defer capital gains from one that is from a property to one that is from shares.
Historically landlords usually pay their capital gains in the year that they have sold their properties. The referral relief will allow landlords to pay the CGT at a later date which will also free up extra cash flow.
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