Buy to let portfolios - capital gains tax

You may be one of the many investors who have several buy to let properties standing at a large gain as a result of the recent housing boom.

Many investors are now looking to sell some of their properties and invest in either commercial properties or residential ones in a different location in order to increase their yield. However, the tax rules being what they are, this churning will result in a capital gains tax liability which cannot be rolled over into the new acquisitions. So you either have to stump up the tax or hold onto the original properties that may not be what you want anymore.

Let us suggest one ‘opportunity’ that may be of interest. If you manage the portfolio of rental properties yourself it is fair to say that you are undertaking a rental ‘business’. Such a ‘business’ can be transferred into a company tax free and will result in an uplift in the base cost of the properties to their current market value.

The properties can now be sold, by the company, tax free because the sales price will now equal their (uplifted) base cost and hence no capital gain will result and hence no capital gains tax bill!

So, maybe you can buy those trendy new flats you’ve had your eye on, after all.