Capital Gain Tax (CGT) is a crucial consideration for landlords and property investors in the UK. The new CGT allowances for 2024/25 bring significant changes, making it essential to understand how they impact your investments. With a reduced allowance, investors must carefully plan their strategies to minimise tax liability while maximising profits.
Capital Gain Tax Allowance 2024/25
For the 2024/25 tax year, the annual Capital Gain Tax allowance drops to £3,000, down from £6,000 in 2023/24. As a result, more property investors will need to pay CGT on a larger portion of their profits, increasing the importance of tax-efficient strategies.
Capital Gain Tax Rates for 2024/25
Basic Rate Taxpayers (income under £50,270): Pay 18% on property gains.
Higher/Additional Rate Taxpayers (income over £50,270): Pay 24% on property gains (previously 28%).
Other Assets (e.g., stocks, shares, businesses): Pay 10% (basic rate) and 20% (higher rate).
How to Reduce Your Capital Gain Tax Liability
🔹 Utilise Your Allowance: Since the CGT allowance has been reduced, ensure you take full advantage of it before the tax year ends.
🔹 Consider Joint Ownership: Transferring ownership to a spouse can double the tax-free allowance and lower the overall tax liability.
🔹 Reinvest in Other Properties: Using tax-efficient strategies, such as incorporating into a limited company, helps reduce CGT obligations.
🔹 Deduct Allowable Costs: Legal fees, estate agent fees, and improvement costs are deductible and can lower your taxable gain.
🔹 Claim CGT Exemptions: Private Residence Relief (PRR) applies if the property was once your main home, potentially reducing your tax burden significantly.
What This Means for Landlords and Property Investors
The reduction in the Capital gains tax allowance leads to higher tax bills for landlords and property sellers in 2024/25. Therefore, investors planning to sell a property should strategize carefully to minimize tax burdens. Seeking professional tax advice ensures compliance while identifying legal ways to reduce liability.
Final Thoughts: Plan Ahead to Save More
With these changes, consulting property tax specialists and estate planners helps you legally reduce your Capital gains tax liability. Whether you are selling a buy-to-let or restructuring investments, now is the time to refine your strategy.