This far reaching report will teach you all you need to know to “Avoid Paying Too Much Capital Gains Tax” when selling your property portfolio - - - - -

avoiding capital gains tax on second property headers

​Avoiding capital gains tax on second property

Avoiding capital gains tax on second property sales is something all property owners and investors are interested in. And This Is Even More Relevant For Those Looking To Sell An Entire Property Portfolio – where the combined Capital Gains Tax bill on all those properties could be eye-watering.

Here at Property Portfolio Sales we can buy your entire portfolio from you in one hit. And crucially we can structure the sale (from a land registry point of view) over a number of years to minimise your Capital Gains Tax.

Managing all of those sales yourself is of course possible. But wouldn't you rather have someone do the entire process for you - at zero cost - leaving you free to do other things instead?

We’ll examine all of this in a lot more detail in the report below – where you’ll learn:

5 minute read

What exactly is Capital Gains Tax?

Capital Gains Tax is a tax you pay on properties when you sell. This tax is only payable on any PROFIT you make ie the difference between the buying price and the selling price.

Capital Gains Tax ISN'T PAYABLE on your main residence - ie your home that you live in. So what we're actually discussing here is the rental properties within your property portfolio. And how Capital Gains Tax is applied to them upon disposal.

Capital Gains Tax profits

Say you bought a property for your portfolio for £100,000 and it's now worth £150,000. The profit is £50,000 - so £50,000 is subject to tax.

  • Selling price £150,000
  • Purchase price -£100,000
  • Profit = £50,000

Capital Gains Tax fees 

Now let's imagine this same property incurred purchase fees of £5,000 (solicitors fees, stamp duty, mortgage arrangement fees etc). And you also paid out improvement costs of £13,000 (new kitchen, new ​bathroom etc). Then the total of these 2 costs comes to £18,000.

So the amount of profit is now £50,000 - £18,000. Meaning your TAXABLE PROFIT is really £32,000. So you only pay Capital Gains Tax on £32,000

  • Selling price £150,000
  • Purchase price -£100,000
  • Purchase costs -£5,000
  • Improvement costs -£13,000
  • Taxable profit = £32,000
avoiding capital gains tax on second property allowance

Capital Gains Tax Allowance & Examples

​The UK government gives an annual Capital Gains Tax allowance to all UK ​tax payers. And so avoiding capital gains tax on second property sales is all about using this allowance intelligently.

​Example 1a) - single person

​Single person Capital Gains Tax allowance for 2019/20 = £12,000

  • Selling price £150,000
  • Purchase price -£100,000
  • Purchase costs -£5,000
  • Improvement costs -£13,000
  • Taxable profit before allowance = £32,000
  • Capital Gains Allowance -£12,000
  • Taxable profit = £20,000

​Example 1b) - married / partners

​Two person Capital Gains Tax allowances for 2019/20 = £12,000 x 2

  • Selling price £150,000
  • Purchase price -£100,000
  • Purchase costs -£5,000
  • Improvement costs -£13,000
  • Taxable profit before allowance = £32,000
  • Capital Gains Allowance -£24,000
  • Taxable profit = £8,000

How much is Capital Gains Tax on property?

  • For a basic rate tax payer Capital Gains Tax rate is set at 18%
  • For a higher rate tax payer Capital Gains Tax rate is set at 28%.

​So once again looking at: "Example 1b) - ​married / partners" above:

  • ​Basic rate tax payer - £8,000 x 18% = £1,440 to pay
  • Higher rate tax payer - £8,000 x 28% = £2,240 to pay

​Bad news here is that your property profit (after paying Capital Gains Tax) is also counted as income. So you can be forced into a higher rate of tax just by virtue of selling property and taking profits.

avoiding capital gains tax on second property tax

​Selling multiple portfolio properties

We’ve now looked at an overview of “what Capital Gains Tax is” and how “your annual allowances are worked out” – let’s now look at how all of this affects the sale of multiple properties within your property portfolio.

​Selling just a single property is relatively easy to understand from the examples above. But what about selling an entire property portfolio with say 20 properties – how does that all work?

​Example 2) - ​married / partners selling a portfolio of 20 properties at once

Let's look at the exact same value of property as in example 1b) above, but imagine the owner is instead selling a portfolio of 20 properties in 1 year:

  • Selling price (£150,000 x 20) £3,000,000
  • Purchase price (-£100,000 x 20) -£2,000,000
  • Purchase costs (-£5,000 x 20) -£100,000
  • Improvement costs (-£​13,000 x 20) -£260,000
  • Taxable profit before allowance = (£32,000 x 20) £640,000
  • Capital Gains Allowance -£24,000
  • Taxable profit = £616,000

Capital Gains Tax payable on 20 properties

  • For a higher rate tax payer Capital Gains Tax rate is set at 28% and the seller would certainly be pushed into this higher rate tax bracket.
  • Higher rate tax payer - £616,000 x 28% = £172,480 tax to pay

So you can see that the increase in tax from £2,240 for 1 property VERSUS £172,480 for 20 properties is a ​MASSIVE jump.

  • Tax to sell 1 property in 1 year = £2,240
  • Tax to sell 20 properties in 1 year = £172,480

​Sell smarter over multiple years

It would be much smarter to sell these 20 properties over a number of years. ​​Because that way ​multiple years of Capital Gains Allowances could be utilised - ​to drastically reduce ​the tax bill.

But the downside here is ​it would mean taking ​years to sell the portfolio. Not good!!

​A better option would be to sell ​the portfolio to someone who'd BUY all 20 ​properties at once, but who would actually ​ACTIVATE the sales (from a land registry point of view) over a number of years.

​Because ​that way the sale would happen in one go - all done and dusted - ​AND the Capital Gains Tax liability ​would be drastically reduced.

And that's exactly how our Property Portfolio Buying Service works.

avoiding capital gains tax on second property umbrella

​Keep more profits by selling ​to Property Portfolio Sales

Here at Property Portfolio Sales we have the experience and skill to buy your property portfolio ​today. Yet structure the sales over a number of years to ensure YOU keep more of the profits.

This is achieved by using "Advanced Options Contracts".

​Advanced Options Contracts

"Advanced options contracts" allows us to purchase your property portfolio in one clean transaction - and ​also gives us the ability to register the sales over ​a number of years.

So in a nutshell that means:

  • YOU sell your portfolio - head off into the sunset - and enjoy the rewards.
  • ​WE structure the purchase of your portfolio to ensure your Capital Gains Tax bill is minimised.

PS Every portfolio we come across is so unique and different - so don't let the fact that your portfolio "isn't perfect" put you off from getting in touch.

​Our "Advanced Options Contracts" have been perfected over 15 years and gives us the ​ability to purchase just about any portfolio - ​no matter ​if there's any issues.

​Example 3) - ​married / partners selling a portfolio of 20 properties - structured over 10 years

Please look closely at Example 3) below. Because this is where the "Advanced Options Contracts" are used to save you a ton of money that would otherwise disappear as TAX

Let's again look at the same value of property as in example 2) above, but imagine the owner is now selling a portfolio of 20 properties over 10 years:

  • Selling price (£150,000 x 20) £3,000,000
  • Purchase price (-£100,000 x 20) -£2,000,000
  • Purchase costs (-£5,000 x 20) -£100,000
  • Improvement costs (-£13,000 x 20) -£260,000
  • Taxable profit before allowance = (£24,000 x 20) £640,000
  • Capital Gains Allowance (-£24,000 x 10 years) -£240,000
  • Taxable profit = £400,000

Capital Gains Tax payable on 20 properties

  • Because the owner is now selling over 10 years - they're much ​more likely to be a basic rate tax payer.
  • Basic rate tax payer - £400,000 x 18% = £72,000 tax to pay

So there's a HUGE saving in tax to pay - because:

  • Tax to sell 20 properties in 1 year = £172,480
  • Tax to sell 20 properties ​over 10 years = £72,000
  • Saving of tax to pay = £100,480

​SAVE OVER £100,000

​Which means you're avoiding Capital Gains Tax on second property portfolios.

​How much is your time worth?

As well as the savings of Capital Gains Tax - there is also the huge saving on time. Can you imagine the time it would take to sell all 20 properties - one property at a time?

  • Where would you start?
  • ​How many viewings would it take?
  • ​How many ​buyers would pull out last minute?
  • Wouldn't you rather be doing something ​more interesting instead?

​Anything else?

The examples above are ​purposefully simplistic and your actual tax position will have many, many other factors to take into account ​- when working out your overall tax position.

  • In our examples we've used the SAME Capital Gains Tax allowance of £12,000 for 10 years for simplicity. But of course ​this allowance will change over the 10 years.
  • ​Capital Gains Tax rates of 18% and 28% have been used, but of course these rates might change over 10 years.
  • The examples are based on properties of the exact same ​value. And the same amount of capital growth. All ​highly unlikely in the real world.

However the ​concept is ​sound for every single portfolio we've come across.

​Capital gains tax on property previously lived in

​Your Capital Gains Tax position is subject to many other factors such as whether you've ever spent a period of time LIVING in ​a rental property? And if so for how long?

Your accountant / IFA ​is best placed to advise you on all of this.

​Negative equity

​There's still a lot of portfolios across the UK that have properties in negative equity.

​An example of negative equity is where a property that was purchased for £180,000 during the peak of the property boom - is actually now worth ​LESS at say £170,000.

​There isn't a capital gain - so no Capital Gains Tax is ​due upon a sale - as ​there isn't any profit.

In this case there's a Capital LOSS of -£10,000.

This loss can be used to​ offset profits ​on other properties. And in ​later years.

Accountant / Independent Financial Advisor (IFA)

You of course need to talk to your accountant / Independent financial Advisor for an accurate tax position. We're NOT tax advisors and we're NOT offering you any ​financial advice on what to do here. That's where your Accountant and IFA will help you.

However we ARE Property Portfolio experts who can work with your accountant / IFA - to ensure you get to keep more of ​the hard-earned profits.

avoiding capital gains tax on second property conclusion

Conclusion - Avoiding capital gains tax on second property sales

Avoiding Capital Gains Tax on second property sales (excluding your residence) is something you need to understand fully. As this will enable you to reduce your tax bill across your entire portfolio.

Our advice ​as always is to talk to your accountant / Independent Financial Advisor (IFA) – to get a true reflection on the state of your portfolio – and how it impacts your unique tax position.

For many landlords – there will be eye-watering amounts of Capital Gains Tax to pay upon disposal. But the good news is this tax can be reduced by careful planning which involves structuring the actual sales (from a land registry point of view) over a number of years.

We can help you with this by utilising our “Advanced Options Contracts” – where we’ll buy your portfolio – in one clean break – whilst drastically reducing your Capital Gains Tax liability.

​Kind regards​

property portflio sales phil calladine

Phil Calladine - portfolio consultant

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Phil Calladine
 

"Hi there - I'm Phil Calladine - living in Lymm in Cheshire, UK. I have a wealth of property knowledge - and I'm sharing it with you here on this website. I'm also a member of the NLA. Please don't hesitate to contact me with any questions about selling your property portfolio"

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