Married expat buy to let owners can save tax by switching ownership share with a spouse when ditching investment their properties.
Special rules allow spouses to swap shares in any number of properties without incurring capital gains tax.
Behind the measure is a recognition by the tax man that couples will want to overhaul their finances and that this should be done without triggering a tax charge.
Swapping shares is only worthwhile if one spouse pays tax at a higher rate than the other and the one who pays at the lowest rate has spare capacity in their tax bracket.
The latest figures from HM Revenue and Customs show how important swapping shares could be.
CGT surcharge for landlords
CGT receipts for the year were up to £5.5 billion in January and are expected to hit £8.8 billion by March.
“These numbers are predicted to rise steeply with the Office of Budget Responsibility (OBR) estimating receipts will hit £9.9 billion in in the next year,” said Sean McCann, chartered financial planner at NFU Mutual.
“Most of these receipts will stem from people selling houses and flats they’ve been renting out. By doing so, they are hit by an extra 8% surcharge on standard rates of capital gains tax.
“The forecasts show receipts increasing sharply to £13.3 billion in five years, which suggests that more and more buy-to-let investors are expected to unload properties as tax changes bite.”
Tax bonanza
CGT is charged at 18% for basic rate taxpayers and 28% for higher rate taxpayers selling or giving away residential property other than their main home.
“Slashing tax relief on mortgage interest payments on buy to let homes means that for a growing number of landlords, the figures no longer add up,” said McCann. “Many have enjoyed rising property prices over many years and will seek to cash in, providing a tax bonanza for the government.”
“Many of our customers work in partnership with their spouse or civil partner to reduce their combined tax bills, taking advantage of each individuals CGT allowance of £11,300, by transferring shapes and property between them.”
“However, we’ve been warning our customers to watch out for potential tax traps. In some circumstances, transferring property between spouses could trigger a stamp duty charge.”
The annual CGT allowance rises to £11,700 from April 6.
