Private-equity bosses are under fire for paying almost no tax, but while the way they use tax breaks is “peculiar to them”, ordinary investors can benefit from the same techniques, says David Budworth in The Sunday Times. One perk they use is business-asset taper relief, which is “easier to take advantage of than many people imagine” and can slash the tax bill on your profits from 40% to 10% in just two years, says John Whiting at PricewaterhouseCoopers. Qualifying investments include farmland, shares in your employer or small private firms, Aim-listed stocks and holiday homes.
For example, by turning your second home into a furnished holiday let, you qualify for business-asset taper relief and pay less capital-gains tax. The property must be up for rent for at least 140 days a year and let for at least half of that time. It must be fully furnished, let at a market price, and cannot be occupied by the same person for more than 31 days in any seven months. After a year, a higher-rate taxpayer pays 20% tax instead of 40%; after two years, it’s just 10%. On a £100,000 profit, that’s a £10,000 bill, rather than a £40,000 one.