In order to deal with capital gains tax, you should know the strategic ways. It is difficult to avoid the tax. There are number of small investors who end up paying very high tax in the name of capital gains. It can be avoided or reduced to great extent if you take right steps at right time. If the tax levied by the Government increases, the collection will decrease as tax payers would like to escape in all possible ways.
There are two reliefs if you declare a property as your main residence. These are ‘principal private residence relief’ and ‘private letting relief’. The capital gain tax can be avoided or reduced based on how long you have been living in the site. You should choose the most appropriate property as the main residence so that substantial savings are obtained.
You are required to deal with properties where you will not live-in. The cost incurred in selling, buying and renovations can attract offset gains. However, you should be prepared to pay capital gain tax on property in the long-term perspective. The capital gains and shared and mutual funds should be appropriated properly. If you incur loss, the loss should be declared within the stipulated period of time so that you can make the most of your money.
Calculation of capital gains
You should understand the procedure to calculate the capital gains for the house that you no longer live-in. If you sell a property for profit, you are liable to pay tax on the accumulated amount (gains). You will pay tax on the amount after deducting the ‘private residence relief’ as stated by HM Revenue & Customs (HMRC).
If you lived in the property for the whole time before selling it, you are not required to pay any tax. However, if there is large garden, there will be some exceptions. If a part of the property is used for commercial purposes, you should pay corresponding tax.
If you lived in the property and moved out to new location, a part of the income will get relief under private residence. The tax calculations are done differently when the property sale happens after 5th April, 2014. If the property sale happens on or after 6th April, 2014, you will be able to add only last 1.5 years for deductions. If you let the property for rent, you will get letting relief.
The tax on gains attained in the same month on shares will be equal to tax that is gained by selling after a decade. The potential liabilities should be listed properly so that you will be able to pay less tax. The ‘taper relief’ was removed in 2008 and you should pay higher tax amount. The loopholes present in the law and implementation are being filled so that it is difficult to save for landlords. By following the advice of experts, you will save lot of money.