Articles & FAQ’s

As with income tax, unless it is from the disposal of a tax-free asset (e.g. your main residence), then tax will be chargeable if the gain/profit is above £3,000 (the ‘annual exemption’). As well as keeping gains below the annual exemption, don’t forget that when calculating your gain, you can take into account costs of the sale (and the original purchase) plus the costs of any enhancements/improvements which are reflected in the value of the asset upon sale (e.g. an extension or new conservatory on a rental property).

Gifts count as disposals for CGT purposes, so a gift is the same as a sale with proceeds being taken as the market value at the time. If it is an asset used in your trade, you may be able to ‘holdover’ (i.e. defer) the gain until the donee sells it. If the asset is a building with a mortgage secured against it, Stamp duty Land Tax (SDLT) might also be chargeable if the donee assumes that debt. As long as you survive 7 years, there are no inheritance tax (IHT) implications of the gift to an individual either.

By itself, no. Incorporating your business into a limited company is simply transferring value from business assets into company shares, which are equally as chargeable to IHT. However, shares are often easier to gift to family members and/or into trust than property, so placing the business in a company can be the first stage in wider IHT planning. However, be aware that incorporation has CGT and SDLT implications.

If you pay a market value rent whilst doing so, or at least your share of the property expenses if now jointly-owned and occupied, then yes; if not, then the property will remain in your estate for IHT purposes until you move out or start paying rent. You cannot simply pay rent for 7 years either, it must be for the duration of your occupation.