Practical Ways to Reduce Capital Gains Tax in the UK

Deferred sale proceeds occur when part of the payment for an asset is received after the sale. This can happen through future payments or instalments. 

For Capital Gains Tax (CGT), it is vital to handle these proceeds carefully. Deferred consideration can be either: 

• ascertainable (fixed value) or 
• unascertainable (unknown value)

HMRC allows interest-free instalments if payments stretch beyond 18 months. Accurate valuation, proper documentation, and effective capital gains tax planning are essential to managing these transactions.

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Investors can reduce Capital Gains Tax in the UK using tax-efficient schemes. The EIS offers 30% income tax relief and CGT exemption on profits after three years. The SEIS provides 50% income tax relief and CGT exemption on gains. VCTs allow 30% income tax relief, tax-free dividends, and CGT-free profits. Individual Savings Accounts (ISAs) offer tax-free growth and income. 

These schemes are key for effective capital gains tax planning. Professional advice guarantees maximum tax savings and compliance.

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Investors’ Relief Capital Gains Tax UK lowers the CGT rate from 20% to 10% on profits from qualifying shares. To qualify, investors must buy ordinary shares issued for cash after 17 March 2016. Shares must be fully paid and held for at least three years. 

The company must be an unlisted trading company or a trading group’s holding company. Investors must not be employees or officers, except unpaid directors. This relief can significantly reduce tax bills on share sales, boosting investment returns.

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Inherited assets are not immediately subject to capital gains tax in the UK. CGT applies only when you sell the inherited asset. The base value for CGT is the asset’s market value at the date of inheritance. 

Accurate valuation is vital to avoid HMRC disputes. For residential property, CGT is 18% for basic-rate taxpayers and 28% for higher-rate taxpayers. Annual exemptions can reduce your CGT liability. Capital losses can also offset gains.

Professional valuation and record-keeping are essential. Timely asset disposal can optimise tax outcomes. Engaging Capital Gains Tax advisors ensures accurate valuations, effective tax planning, and HMRC compliance. Advisors at Apex Accountants help reduce tax liabilities through practical strategies. 

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At Apex Accountants, we understand how important effective Capital Gains Tax (CGT) planning is for property investors. Managing CGT impacts your profits when selling properties. 

Different property types face varying tax rules. Buy-to-let properties attract income tax on rental income and CGT when sold, 18% for basic-rate taxpayers and 28% for higher-rate taxpayers. 

Commercial real estate owned by companies faces Corporation Tax at 19%-25%. Plus potential VAT and higher Stamp Duty Land Tax (SDLT). Second homes incur a 3% SDLT surcharge and higher CGT rates due to no private residence relief.

Strategic planning, like timing property sales and using tax reliefs, reduces your tax burden. Our experts provide tailored tax strategies, advise on efficient property structures, and ensure HMRC compliance.

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Selling a buy-to-let property? Knowing what you can deduct is important. These deductions lower your capital gains tax on property and help you save money.

1. Acquisition Costs: These are the costs you pay when buying the property. They include:

• Purchase price
• Stamp Duty Land Tax (SDLT)
• Legal fees
• Survey costs
• Valuation fees

1. Improvement Costs: Deduct costs that increase the property’s value. These include:

• Extensions
• New kitchen or bathroom
• Heating system upgrades
• Insulation

1. Selling Costs: Deduct these expenses when selling:

• Estate agent fees
• Legal fees for the sale
• Marketing costs
• Energy Performance Certificate (EPC) fees

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To qualify for Principal Private Residence Relief (PPR), the property must be your main home. You can only have one main residence at a time. Married couples or civil partners can share a residence.

You must live in the property. Temporary absences, like for work or travel, are allowed if you plan to return. No part of the property should be used solely for business. Occasional home office use is fine.

The grounds should be no larger than 5,000 square meters (about 1.24 acres). Larger grounds may qualify if the property suits the character. The property must not have been bought solely for profit.

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To qualify for Investors’ Relief UK, your shares must meet certain conditions. The shares need to be ordinary, fully paid, and purchased with cash on or after 17 March 2016. You must hold the shares for at least three years to qualify.

The company issuing the shares must remain a trading company during your holding period. Additionally, you cannot hold an employment role in the company. However, an unpaid director position may be acceptable under specific conditions.

It’s essential to make sure your investment is for genuine commercial reasons and not just for tax benefits. You can benefit from significant tax savings on your capital gains by fulfilling these conditions.

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Principal Private Residence Relief (PPR) and Capital Gains Tax Savings

Principal Private Residence Relief (PPR) helps homeowners reduce their capital gains tax in the UK when selling their main home. If the property was your main residence for the entire time you owned it, you can claim a full exemption from CGT on the property.

This relief is significant for homeowners. It removes tax on any profit made from selling your home. But the property must have been your primary residence for the entire ownership period.

Even if you move out before selling, you can still claim relief for the last nine months of ownership. It’s important to note that renting part of the property or using it for business could reduce the relief.

At Apex Accountants, we guide you through the rules around PPR and other schemes and increase your tax savings.

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