The Taxing Reality: Landlords Should Beware of Capital Gains Consequences James Dean from Tax Bees explains

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This year more than 135,000 taxpayers will discover the perils of Capital Gains Tax on residential properties – creating a windfall for the treasury and a hole in landlord’s pockets.

Selling a rental property is often a finely balanced decision and the impact of a lumpy sum heading in the direction of HMRC should not be discounted.

Whilst some landlords are looking to divest themselves of properties that seem at present to be marginally profitable there are many factors to consider, not least the possibility of continued capital appreciation.

Recently one of our landlord clients popped in for a chat about selling their property, they were near to a sale and wanted to know how much they would be left with after paying CGT.

The plan was to transfer the profit to a savings product, collect the interest, and never have to darken a rental agent’s doorway again.

It was a simple question with a simple answer…… the £50k profit in the property netted down to £31,680 after transaction costs and tax were paid. (In this instance higher rate tax, but still a shocker).

Our client needed a moment to compose themselves! After administering a strong cup of tea, we took a moment to compare their position if they were to hold the property.

With a bit of imagination, we had a look at available data and came up with some forecasts to play with – data sources included Savills, the Bank of England, Statista and Mabel, the office pooch.

We came up with this – A Chart:

We then applied the forecasts above to their property to have a look at the position in the future and cane up with this: Another Chart!

So the calculation showed a £41,000 improvement in profit by holding for five years – in this case the client was at 80% LTV and so leverage significantly improved their profit over time. Mabel, the office dog, recommended that the client hold the property and they agreed.

Each property is different, and everyone will have their own ideas on what the future will hold.

It is strongly recommended that you fully consider your CGT and Personal Tax position before taking a decision to dispose of a rental property. Look before you leap!

There are other reasons to hold on to your property:

  • Relatively low savings rates
  • High inflation
  • Opportunities to reprice Reduction in financial security
  • Weaker selling prices
  • Difficulty in re entering the market Cost of re entering the market – SDLT
  • Just be a contrarian – Mr Warren Buffet

We’d be happy to discuss any aspect of this article with you, and to look at your own circumstances to see if selling or holding will work best for you.

PS If you decide to sell you only have 60 days post completion to let HMRC know about it – we can help with CGT Returns and with keeping you tax liability to a minimum…. at a very reasonable price.


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What our customers say

Celia Prause
2. April, 2024
Great experience - I knew who I was talking to and James and Jayne were at all times friendly, competent and supportive. Even the international element didn’t deter them. An excellent service.
Katia Leonova
28. March, 2024
It is worth a lot when you can get a professional advice over the phone. Tax Bees answered my question just in minutes, in a extremely friendly manner, and with no attempts to upsell. Highly recommend them as CGT professionals!
Barry Loughran
21. March, 2024
I can only endorse all the previously posted positive reviews about this business. Friendly people and yet extremely knowledgeable and professional regarding the subject matter. A pleasure to deal with and I can strongly recommend them for all your taxation matters.
Andy Bacon
5. March, 2024
Having sold a UK residential property I had owned for 18 years I was facing a potentially significant CGT liability. Although the HMRC calculator appeared pretty straightforward I decided to approach an expert and fortunately found James just in time. I found his willingness to provide no obligation up-front advice over the phone very welcome and decided to appoint Tax Bees for peace of mind with the added bonus that his very reasonable fee might be saved when he got into the detail of my case. I certainly pays to spend some time putting together all the facts; as a result it proved very fruitful to invest in James when he significantly reduced my expected liability by many thousands compared to the HMRC online calculator. Lesson learnt - its never as simple as it first appears and not all the rules are entirely transparent!
Adam Jenkins
21. February, 2024
Tax Bees were fantastic at quickly and calmly helping us with a family tax situation. James was a reassuring presence during a stressful time. I wouldn’t hesitate in recommending him.
14. February, 2024
I asked Tax bees at short notice to help out with my CGT submission, i found the team to be very efficient and very approachable . The fee was fixed .. so no nasty surprises at the end, and i believe the tax saving and peace of mind knowing that a professional had been involved is very reassuring. Thanks to James and Jayne.
Sara Barron
2. February, 2024
Thanks so much for everything and for completing our return on time. You've been so easy to work with and have done an excellent job. I found Tax Bees online and was nervous about using a service without a personal recommendation. However, I would highly recommend Tax Bees to anyone looking for help with their Capital Gains Tax, particularly James Dean, who has been exceptionally helpful and efficient from the first email enquiry and has achieved a great outcome.
tracey hale
28. January, 2024
Fantastic service very efficient attention to detail Friendly and very knowledgeable
Kate Jones
24. January, 2024
I popped into Tax Bees on the off chance that I might be able to get some help with my Self Assessment Tax Return. I drive past the building everyday and often wondered whether they would be able to help advise me. James and Jayne were so friendly and welcoming and after a nice chat and a coffee they reassured me that they could help straight away - even during the month of January which is a very busy month for them. I would certainly recommend Tax Bee's if you have any Tax needs or concerns for your business or if like me you just need help and guidance on that dreaded self assessment. James also looked into my last four years of pension tax relief and managed to get me a rebate. Very happy customer. Thanks again James and Jayne!
Melanie Palmer
22. January, 2024
We recently hired Tax Bees for capital gains tax reporting and we're very happy that we did. James was very helpful, knowledgeable and efficient. Money well spent :)