Is it worth suspending dividends for a year to minimise CGT-related tax?

[d000hg]

It looks likely we'll be selling a rental property this tax year and while we've bought and sold quite a few properties, this is the first time we are selling a house we don't live in - hence first exposure to CGT.
My wife and I co-own the property and both of us have managed to avoid being higher-rate tax payers. As I understand it we have a combined CGT allowance of £24.6k but are likely to make about 50k on the property.

My understanding is that as well as attracting CGT, this profit also goes towards your income tax threshold and that's where I'm wanting to make sure I don't screw up. If I stand to make £25k profit does this simply mean I take my £12,3000 allowance and then have £12,700 less income I can take before hitting the HR threshold?

[Craig@Clarity]

It looks likely we'll be selling a rental property this tax year and while we've bought and sold quite a few properties, this is the first time we are selling a house we don't live in - hence first exposure to CGT.

Have you every lived in it in the past as part of your main residence? If so, you'd be entitled to lettings relief which would drive down the CG subject to CGT.

As I understand it we have a combined CGT allowance of £24.6k but are likely to make about 50k on the property.

Yes. If the property is owned 50:50, you'd split the gain likewise and each have an AEA of £12,300.

My understanding is that as well as attracting CGT, this profit also goes towards your income tax threshold and that's where I'm wanting to make sure I don't screw up. If I stand to make £25k profit does this simply mean I take my £12,3000 allowance and then have £12,700 less income I can take before hitting the HR threshold?

You need to look at your taxable income first after all deductions and allowances. Let's say you have taxable income after personal allowances and deductions of £27,700. The higher rate tax band kicks in after £37,700. This means you're left with £10k basic rate tax band left. Your CG after AEA is £12,700. This means the first £10k will be taxed at the basic rate for CG at 18% and the remaining £2,700 will be at 28%.

So if I read your question right, yes, you would need to ensure your other taxable income (exc CG) is £25k after taking off your personal allowance (or £37,570 before deductions and personal allowance)

[NowPermOutsideUK]

I was quite sure letting s relief had been abolished. Are you sure that is still in place as from memory there was 40k of gains that could be tax free

[Craig@Clarity]

I was quite sure letting s relief had been abolished. Are you sure that is still in place as from memory there was 40k of gains that could be tax free

Not quite abolished. It changed last April but it's still available although it's restricted now. If you were a live in landlord alongside your tenant/lodger, you could be entitled to the relief.

[d000hg]

Have you every lived in it in the past as part of your main residence? If so, you'd be entitled to lettings relief which would drive down the CG subject to CGT.

Nope, never.

You need to look at your taxable income first after all deductions and allowances. Let's say you have taxable income after personal allowances and deductions of £27,700. The higher rate tax band kicks in after £37,700. This means you're left with £10k basic rate tax band left. Your CG after AEA is £12,700. This means the first £10k will be taxed at the basic rate for CG at 18% and the remaining £2,700 will be at 28%.

So if I read your question right, yes, you would need to ensure your other taxable income (exc CG) is £25k after taking off your personal allowance (or £37,570 before deductions and personal allowance)

Just to clarify are you saying CG comes before normal income or after or does it make no difference?

Thanks.

[Craig@Clarity]

Just to clarify are you saying CG comes before normal income or after or does it make no difference?

Thanks.

Comes after. Whatever tax band amount is left is what determines the CGT rates.

[d000hg]

We've had some tentative interest in a property we have been sat on negative equity for over a decade, running as a BTL through necessity rather than desire. It sounds like we might now be able to sell it for a small loss which we would probably consider worth it to escape the hassle.

Is CGT considered per sale, or over the whole tax year? Because it would make any loss less painful knowing it is partially offsetting other tax.

[Craig@Clarity]

Is CGT considered per sale, or over the whole tax year? Because it would make any loss less painful knowing it is partially offsetting other tax.

Considered over the whole tax year. You'd look at each sale in that tax year and any capital losses from one sale can be offset against other capital gains. Unused losses can be carried forward.

[d000hg]

Considered over the whole tax year. You'd look at each sale in that tax year and any capital losses from one sale can be offset against other capital gains. Unused losses can be carried forward.

Excellent, thanks. Was it ever the case that you could roll-over your CGT allowance from year to year historically, or have I imagined that? Obviously not the case now.

[Craig@Clarity]

Excellent, thanks. Was it ever the case that you could roll-over your CGT allowance from year to year historically, or have I imagined that? Obviously not the case now.

It's never been the case you could roll forward the CGT allowance. The losses yes, allowance or AEA no. Use it or lose it!