Investors who have purchased overseas property can now capitalize on a reduction in U.K. Capital Gains Tax (CGT) to 18% from April 2008 from the previous rate of 24% thus increasing profits on overseas property investment.
The changes will take effect in the new financial year beginning 6th April 2008 and will include a £9,200 CGT allowance. Overseas property investments will only be subject to 18% tax on any gains above £9,200 replacing the previous sliding scale of up to 40%.
Property investors could also reduce tax bills further by splitting the capital gains with their partner where a property is jointly owned, and in effect pool their threshold allowance of £18,400.
Additionally, owners will be entitled to up to £40,000 letting relief against any gains earned. And as with the CGT allowance, providing the overseas property investment is held in joint names, the letting relief is available to each owner effectively doubling the maximum letting relief to £80,000.
Other tax reductions can be made upon the sale of property if the investor has previously let the property and then lives in the property for any length of time, under the UK Principle Private Residence Relief (PPR). This allows the owner the last three years worth of gain, plus the period in which they have lived in the property, completely free from CGT.
Although PPR generally means CGT is not applicable when selling your main and only residence, if more than one property is owned, the PPR may be offset against any property in the UK or overseas.
(extracts taken from Obelisk Investment)