Why tax advice is so important BEFORE you sell any rental properties

There are several reasons you might be selling your rental properties, here’s a list of the ones I hear most often: –

1. I’ve had enough of landlords being vilified by Governments, so-called housing charities, and much of the mainstream media
2. Interest rate rises are crippling my business
3. Section 24 tax is unfair and crippling my business
4. Selective licensing is nothing more than a money raising scam for local authorities, does nothing to improve quality, and reduces demand
5. It takes far too long and is far too difficult to end relationships with poor payers and disrespectful and anti-social tenants
6. The plan was always to take life a bit easier eventually. That time has arrived and the plan now to sell a few properties and pay off mortgages has finally arrived

There are of course many more reasons I could add to the list above, but if you ask any landlord who has finally decided to throw the towel why arrived at their decision they are likely to include at least two or three of the reasons I’ve stated above.

It’s IMPORTANT to plan your exit

Whatever the straw that broke the camel’s back, landlords must never act only on impulse. Unfortunately, most do though, especially when their decision is to sell. The red mist has descended and they cannot think clearly, so they walk blindly into a trap that’s very dangerous to their wealth. That trap is called Capital Gains Tax and itoften hits them like a speeding train when they least expect it. However, with careful thought, planning, and professional advice there are often a variety of opportunities to reduce or sometimes completely mitigate CGT. For example: –

• Changing the ownership share of the property between spouses to fully utilise annual CGT exemption allowances or to pay the lower rate 18% of CGT as opposed to the 28% rate
• Timing your property sales to span tax year ends or to sell in years when you are more likely to be a lower rate tax payer
• Incorporation of your property rental business as a going concern, which can re-base the value on which CGT is charged by washing the gains out of properties into company shares
• Emigrating to tax-haven which doesn’t charge CGT on overseas capital gains can be particularly efficient if a significant proportion of your capital gains occurred prior to 2015

The above list is by no means exhaustive either, so if you are planning to sell any or all of your rental properties please get in touch with us first by completing the form below.

There are also reasons you might not want to sell the geese that the golden eggs

There can be no doubt the UK will always have a Private Rented Sector and the property market will continue to be a safe haven for investment growth, so it is absolutely not true that all landlords will sell up regardless of what the media might tell us. In fact, there are newcomers to the market every day and our Landlord Tax Consultants are always pleased to help them create the most efficient ownership structures for their investments. Either way, whether you are buying or selling, we are here to help.