1. Selling some shares you acquired when the share price was really low
2. Selling a ‘buy to let’ property you acquired well before the housing slump
3. Selling your business
4. Selling that painting you inherited from granny 20 year ago
It is ideal to think about the tax planning before you sell such property and in this case I am glad you are reading this article.
First of all, the majority of people are entitled to a capital gains tax annual exemption of £10,100.
This is how much of a gain you can make before paying capital gains tax which is currently at a rate of 18%. Please note this is not shared between married couples and civil partners and therefore you have one each.
It is possible to gift half of the asset to your spouse/civil partner before selling it and take advantage of two annual exemptions. Ideally, you would do this some time before the actual sale to avoid the tax office enquiring into the transaction.
A tax saving of up to £1,818 (£10,100 x 18%) could be made by doing this, however, you do need to ensure the costs of putting it into joint names does not outweigh the tax savings.
Some helpful suggestions…
So, if you have used up all your annual exemptions what else can you do?
• Have you got any old capital losses from the past that you have not used? These carry forward until you either use them or die! If you have old losses then use them.
• Do you own any other property which could create a loss? You may have some shares you have been waiting forever to make a profit on but they still sit at a loss. You could sell them at a loss and offset this against your gains.
• Has your business made a loss and you have nowhere else to offset the loss? It is possible to convert business losses to capital losses as an extension to the sideways loss relief provisions.
• If you are feeling entrepreneurial you could invest in Enterprise Investment Scheme (EIS) shares. These are generally high risk shares but come with some tax advantages such as a reduction to your income tax at 20% and the ability to holdover capital gains in your new shares until such a time that you sell them or they no longer qualify.
• If you are going to make an extraordinarily large gain then you could consider leaving the UK before you sell! This is a very big decision and at the very least you would need to be away for as little as five tax years. Expert tax advice is needed in this respect!
There are, of course, many more ways to limit or delay your capital gains but I have run out of space to tell you all about them. Maybe tell you about some more next month!
Under the Business Payment Support Service at HMRC you can enter into a payment plan to help pay your income tax, PAYE, corporation tax, VAT and National Insurance.
All you need to do is call 0845 302 1435 and you could be surprised by how helpful the tax office actually are.