Landowners who sell surplus cottages face paying up to 28% Capital Gains Tax (CTG) – but they could slash this by investing the profits into an Enterprise Investment Scheme.
According to Old Mill Accountants and Financial Planners, the savings from deferring CGT in this way could be considerable.
“The Chancellor has become increasingly keen to raise the tax burden on individuals who are second homeowners,” explains director of rural services Paul Neate.
“This can have quite an impact on farmers who may have surplus cottages on farm holdings that provide diversified rental income.”
As part of the changes introduced from 6 April 2016, CGT rates on the disposal of second properties are levied at 28% for higher rate taxpayers and 18% for basic rate taxpayers.
“Any farmer selling a farm cottage is likely to have owned it for many years, so the capital gain could be substantial, even after applying the annual CGT exemption,” warns Mr Neate.
