The Easiest Way for Buy to Let Landlords to Avoid Capital Gains Tax
The Easiest Way for Buy to Let Landlords to Avoid Capital Gains Tax
The easiest way for buy to let landlords to avoid capital gains tax is never to sell and to keep re-mortgaging to extract cash out of their properties.
And the easiest way to build a portfolio is to use the re-mortgaged cash as deposits to buy more properties, says David Lawrenson of www.LettingFocus.com.
One of the worst taxes for landlords is capital gains tax (CGT), which is an especially harsh tax now that landlords have to pay a higher rate than other folks selling other assets – all part it seems of the government’s plan to seemingly reduce the size of the private rented sector, or at least that part of it which in the control of ordinary small landlords. (As I wrote on the blog at the end of September, the government seems keen to do as much as possible to drive the private rented sector away from Mom and Pop landlords and into the control of the big institutional investors, some of whom donate to political party funds and all of whom have been waging a campaign to persuade the media that they, the big boys, are the best thing for tenants, with their three year tenancies and high, premium rents).
But the great news is that CGT can be avoided easily. A great way to avoid capital gains tax completely and make money in property is by never selling any of your property, other than your own home, (which, of course is exempt from CGT anyway).
This is because you only realise a capital gains tax liability when you come to sell a property which is not your own home.
But if you don’t sell any, you don’t pay CGT. Simple!
And when you die, capital gains tax dies with you. Of course, you will still have inheritance tax to pay, but that will be just the same for anyone else.
The Easiest Way for Buy to Let Landlords to Avoid Capital Gains Tax and Build a Portfolio
Many people who have done very well in property have done so by just buying and then holding onto their portfolios for as long as possible, indeed for their whole lives in some cases – and letting house price inflation over time, lead to an increase in the value of their properties. Then, once a property has gone up enough, they simply re-mortgage and take the money out of that property, either to spend it or use as the cash for deposits on new properties – thus they build up their portfolios over time. No CGT to pay!
It is as simple as that. Re-mortgaging and taking cash out in this way and never selling has been very effective for many people who perhaps started with very little money and just one property and now have multiple let properties worth millions of pounds.
Of course, you have to take care not to over-borrow, in case interest rates rise – and to protect in case of some other contingency, but you get the general idea, I hope!
Buying in the right area, where house prices have gone up over time helps, of course, to realise the really big gains.
Re-Mortgaging – The Easiest Way for Buy to Let Landlords to Avoid Capital Gains Tax
Whilst it is true that it was easier to do this in the old days, (before the 2008 crash) when 80% or even 85% loan to value (LTV) mortgages were easier to obtain, mortgage finance for buy to let today is not as generous as it once was.
But we still hear of people now who are buying the right type of properties and who can still get 75% LTV loans and which still easily pass the mortgage lenders’ more restrictive underwriting requirements for buy to let loans, such as the higher rent to interest ratios.
It’s getting better too, because in the last year, buy to let mortgage finance seems to be really getting a lot easier – a big part of the reason for this is the low arrears rates, (which lenders like), and the entrance of new banks. Things are really easing up.
Getting Private Finance
And if you still struggle for mortgage finance and/ or for deposits, the large number of networking meetings around the UK for landlords and property investors are great ways to find private finance, (which can be in the form of equity or loans) using Other Peoples’ Money, or OPM, as it is often known in the biz!
This is especially the case if the property you are buying needs to be improved to make it a lettable proposition. Basically, you buy it, do it up, then re-mortgage and repay the private investor. Later on, if house prices rise fast enough, you can then re-mortgage again, taking out cash for your next property purchase, in the way I have described.
But do your due diligence on anyone you get private money from and make sure you have proper legal agreements drawn up. And do have in place an exit strategy if things don’t work out or if, say, interest rates rise.
If you are selling a let property and have to pay CGT, my book, “SUCCESSFUL PROPERTY LETTING” has much more on how to minimise it (and how to set up your tax affairs to plan for it better in the first place) Find Out More and Buy it.
Services for Private Landlords
We help landlords and property investors by showing them how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk. Our advice is completely independent. We take don’t commission payments or fees from anyone, ever.
Services to Businesses and the Public Sector
We advise a range of organisations too to help them develop and improve their services and products for private landlords. David Lawrenson, founder of LettingFocus, also writes for property portals, speaks at property events and is regularly quoted by the media.
HOME PAGE OF THIS BLOG: Blog
THE HOME PAGE OF THE MAIN SITE: http://www.LettingFocus.com
For general information on our CONSULTING SERVICES: Consultancy and Seminars
For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS: Property Advice
CLIENT TESTIMONIALS – from both organisations and private landlords: Testimonials
IN THE MEDIA: Recent Press Coverage
“SUCCESSFUL PROPERTY LETTING”:
Our book is the highest selling personal finance and property book in the UK. Click here to Find Out More and Buy it. And if you are from an organisation and would like to bulk buy, please ask us for special rates.
“BUY TO LET LANDLORDS GUIDE TO FINDING GREAT TENANTS”:
Also, get this great new guide here, which covers everything you’ll ever need to know to avoid either you or your letting agent getting anyone other than the perfect tenant. Click Here to Buy It.
BOOK FOR TENANTS:
Kids going off and renting for the first time? My Book for Tenants is also Available
TO JOIN OUR FREE NEWSLETTER MAILER which goes to over 3,970 people (as at June 2018) just send an email to [email protected]
We do not send spam or sell our mailing list to advertisers, though we occasionally mail landlords about good products from third parties. Please put us on your “white list” to ensure you receive our emails.
OFFERS ON PRODUCTS FOR LANDLORDS and TO ADVERTISE YOUR PRODUCTS to LANDLORDS: Landlords Resources
PERUSE LAST TEN BLOGS BY GETTING THE RSS FEED: Click Here
NEXT ANNUAL SEMINAR EVENT FOR LANDLORDS: Landlord and Property Letting Seminar
TWITTER PAGE My thoughts on property, personal finance, plus a lot of other random things: Twitter
Copyright of Blog: David Lawrenson 2018. Please link to us here or quote us. We actively pursue copyright infringements. The blog is updated roughly every two weeks.