She added that HM Revenue & Customs would quickly disqualify someone from Private Residence Relief if it seemed as though they had simply moved into the property to pay less tax.
Chris Etherington of RSM, another accountancy firm, said moving into a rental property before selling it could store up CGT issues for the eventual sale of any other home the landlord owned, so would need to be considered carefully.
Use a company structure
Holding investment properties within a limited company comes with a number of tax benefits. The first, which we have mentioned previously, is being able to deduct your mortgage interest payments from your income on your tax bill.
Another perk is that, when you want to get rid of your rental properties, you pay corporation tax on the sale, rather than CGT of up to 28pc. Corporation tax is currently 19pc. From April 2023 this will rise to 25pc, but only for landlords will yearly profits in excess of £50,000.
It is also useful when collecting rental income. Landlords are charged corporation tax on their earnings, rather than income tax. The rates for the latter are 20pc, 40pc and 45pc depending on your earnings.
Unlike income earned by individuals, there is also no National Insurance due and if the company pays out less than £2,000 in dividends in a financial year, these payments are tax-free.
Mr Etherington said: “It’s important to note though that HMRC is likely to take a dim view of selling properties soon after incorporating.”
Make use of your partner’s tax allowance
Married couples and civil partners who are selling a rental property can utilise gifting rules and their individual capital gains tax allowances to reduce their bill. If one member of the couple has already used up their CGT allowance for the year they could gift their half of the property to their spouse, who can use their full tax-free amount.
For instance, if a husband and wife sell a property jointly for a £20,000 profit (or £10,000 each), and the wife has already used her full £12,300 tax-free allowance, she will be liable for CGT on the full £10,000. The husband’s £10,000 gain would fall below his allowance and be tax free. However if the husband owned the property outright, he would be able to use his full £12,300 allowance and pay tax on just £7,700 of the £20,000 gain.