Savings And Investments Tristan on 27 Jul 2008 04:09 pm
How to sell your property and pay no capital gains tax
I was just having a chat with a friend of mine who has a 2nd property which they rent out. They have no mortgage on this property, and at some point would like to access the capital in the propety, but don’t wish to pay the capital gains tax.
I suggested that there are two ways to do so, one would be to mortgage a portion of the property, the other would be to sell a portion of the property.
There are advantages and disadvantages to both, however, if you have sold rather than mortgaged a portion of the property, you will have realised a capital gain.
However, if you only sell a portion of the property that is less than the capital gains tax yearly allowance (currently £9,600 for an individual) there will be no capital gains tax to be paid, and because you have sold that portion rather than mortgaged it, there is no interest to pay. If you repeat this every year until you have sold the proportion of the property that was indeed a capital gain, then you will have realised capital gains without paying any capital gains tax.
You’re probably wondering how you could achieve this. By changing the ownership of the property into tennants in common rather than joint tennants, you will be able to split the ownership of the property up into fractions.
The inspiration for this idea came from the World 16 who do fractional property ownership schemes for investors.
