Family Capital Gains Tax

A good tip to reduce the Capital Gains Tax liability for the family is to try and ensure both spouses use their annual exemption each tax year. Also it is often a good idea to ensure gains are realised by the spouse who will be charged tax at the lowest rate.

How can this be done?

Transfers between spouses are done on a ‘no gain no loss’ basis. In other words the donee spouse is deemed to have acquired the asset at the same original base cost as the donor.

It’s a simple but effective tip: make best use of your family’s allowances.

Furnished Holiday Lettings

Landlords with Furnished Holiday Lettings (FHLs) benefit from numerous tax advantages - profits are regarded as earnings for pension purposes and generous capital gains tax reliefs are available. This makes FHLs more attractive propositions than normal rental properties.

However, it is important to be aware that the conditions to be satisfied for a property to be treated as a FHL changed from 5 April 2012.

The property must be available for letting for at least 210 days (instead of 140) and must be actually let for at least 105 days (instead of 70) during the tax year.

Tips to ensure you still benefit:

-The 105 days actual occupation test can be met by making an election to average periods of occupation of any or all of the FHLs you own.

-If your property qualified as a FHL last year but fails to qualify this year due to failing the actual letting days test, you can make an election to continue to treat the property as a FHL for this year and next (subject to there being a genuine intention to meet the actual letting days test).

Contact us

 If you would like more advice on capital gains tax or furnished holiday lettings, please contact Luke Summerford, Client Manager at our Eastbourne office on 01323 431200 or email him on luke.summerford@plummer-parsons.co.uk