capital gains tax on buy to let property

[bcool]

Hi, my wife and i have a joint mortgage on a buy to let property. our tenants wish to buy. we were wandering how the capital gains tax would be calculated, eg what allowance would we be entitled to being a married couple, would the cgt be calculated on joint income? Thanks on advance

[MissFM]

Re: capital gains tax on buy to let property

Hi Bcool

A couple of links that might help:

http://www.hmrc.gov.uk/agents/toolki...-buildings.pdf

and:

THINK AS A FAMILY, NOT AS AN INDIVIDUAL

We all pay tax on our own individual earnings and assets. But thanks to a number of reliefs and allowances offered to married couples and civil partners, it is possible to reduce the total amount of tax you pay as a couple if you arrange your finances correctly. This, though, works only if one partner pays a lower tax rate. Frank Nash of accountants Blick Rothenberg recommended switching income-producing assets, such as shares, investment funds, bank and building society accounts and jointly owned property, into the name of the partner who pays the lower rate of tax. This way, you pay less tax on dividends, rent and savings interest. "The general rule that jointly owned income is taxed 50/50 can be altered by making a specific election where there has been a genuine outright gift of assets," Mr Nash said. If you are unmarried and transferring assets, this could potentially trigger a capital gains tax (CGT) bill.
MAKE THE MOST OF 'JOINT' OWNERSHIPS

For assets likely to trigger a capital gain (such as a property or shares) it may be worth owning them jointly. Much will depend on how much annual income they generate, when you are likely to sell them and the size of the potential gain. But if a buy-to-let home, for example, is held in joint names, you will be able to use both spouses' CGT allowance. Gary Heynes, a partner at accountants Baker Tilly, said: "In this way up to £20,200 of capital gains can be realised before you pay tax, rather than just £10,100."
Basic-rate taxpayers pay CGT at 18pc, rather than the standard 28pc rate. But couples need to be careful. When calculating CGT, the gain realised is added to the income earned in that tax year; if these two combined push you into the higher tax bracket you will pay the 28pc rate on the gain. People realising "lumpy" assets, such as a second home, are usually better off jointly owning the asset to take advantage of two CGT allowances, as in practice either partner, regardless of earnings, often pays the higher CGT rate.




http://www.telegraph.co.uk/finance/p...-honestly.html

[enquirer]

Re: capital gains tax on buy to let property

This is no small matter, so you would be wise to consult a proper accountant.