The biggest reason for investing in property is to make good gains when we sell. I doubt that anyone who buys property does so just for the sake of owning it.
Our agenda is to make big capital gains!
We know that if you buy a property, live in it as your main residence and then sell, no capital gains tax is due.
What people have started to do over the past few years is, rather than buying a property and renting it out, they buy a property, move into it themselves and let out their existing residence.
This is one of the most tax-efficient ways to invest in property, and shows how a small portfolio, kept over a 15- 20 year period, can produce a very significant (i.e. ₤1 million) tax free gain.
So, what does that mean?
Let us say that you have brought a property and have lived there for three years; you then let it out for three years and sell it.
What’s your tax bill?
Zero! This is because the duration of your stay in the property is exempt and so are the last three years of ownership. This is a concession given by HMRC. Where a property has previously been a main residence, then the last three years are always exempt from capital gains tax.
There is also another handy tax tip that is available to landlords. If you have lived in a property and let it, you can benefit from a ₤40,000 tax break. Smart investors are starting to do that now to help grow their portfolio.
When you use this strategy to grow a portfolio, you are looking to make a £1 million gain over 15 – 20 years, for around four to five properties. The tax-free equivalent of that would be to hold about twenty, standard, buy-to-let properties.
For more information on tax saving strategies visit our sister website Property Tax Portal.
