Are you looking to sell your buy to let property soon? If so, we have a few tips on how to reduce your capital gains exposure.

Gifting to a Spouse

By gifting part of the property to your spouse, which does not attract any capital gains tax, when you come to sell the property a portion of the profits, or gain, is attributable to them. This could help to reduce your exposure to capital gains by reducing how much of the gain is taxed at the higher rate. i.e., if you are already a higher rate taxpayer the full gain would be taxed at the higher rate, however if your spouse is a non-taxpayer then the first part of the gain attributable to her would be at the basic rate (unless the gain would push her into the higher rate bracket).

Continuing Letting

You could also continue to let the property and wait to sell the property when it is more tax efficient. For example, this could be when your personal income is reduced, and thus reduce the amount of the gain to be taxed at the higher rate. Another way to reduce the exposure to capital gains tax is to change the method of letting to short-term lets, i.e., 30 days or less. If the rental periods are within the 30 days or less and the property is furnished then it would qualify as a furnished holiday let (FHL), which would then attract business asset disposal relief (BADR) and reducing the capital gains rates to 10%. The downside of this is that the property would need to qualify as FHL for two consecutive years.

Defer The Capital Gains Liability

Another option to defer the capital gains liability by investing in an enterprise investment scheme (EIS) or an investment seed EIS (SEIS) in the same year that the property if sold. By doing this the capital gains payment is deferred until the EIS or SEIS is sold, it could also be potentially taxed a lower rate than the capital gains rates. There is a drawn back to this method, it would involve tying your money up to get the tax savings. There is also an inherent risk of investing in these schemes, especially with the SEIS, which could result in losing any gains from the sale of the property.

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