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December Questions and Answers
Newsletter issue – December 2025
Q: If I sell my rental property to my tenants at a discount, will Capital Gains Tax (CGT) be calculated on that price or the market value?
A: The answer primarily depends upon your relationship with your tenants. If they are not deemed to be "connected persons" (i.e. not relatives, business partners or part of a disguised gift arrangement), HMRC should base CGT on the actual sale price of the property.
However, if the discount is unusually steep or looks like an attempt at tax avoidance, HMRC could use the market value instead to calculate CGT. Either way, reporting and paying CGT on residential property sales must be done within 60 days of completion.
Q: Can I gift £50,000 worth of Premium Bonds to my young grandchildren, to reduce what will have to be paid in Inheritance Tax (IHT)?
A: You can buy Premium Bonds for grandchildren under 16, but they must be held in the child's name through a parent/legal guardian. Once they turn 16, they can manage the account themselves.
Whilst the prizes from Premium Bonds are tax-free, the initial gifting of the £50,000 does not remove the money from your estate immediately. Unless the gift qualifies for exemptions (e.g. £3,000 annual allowance or gifts from surplus income), it remains a Potentially Exempt Transfer (PET). PETs only become IHT-free if you survive seven years after making the gift.
Q: I've recently moved to being self-employed and am working from home. Are there any tax reliefs I can get?
A: Self-employed individuals working from home can claim part of their heating and household bills as business expenses. It is worth noting that employees required to work from home may also qualify for tax relief, but not if they simply choose to do so.
Only work-related costs (e.g. business phone calls, gas/electricity for your work area) are allowable. Items with mixed personal and business use (e.g. rent, broadband) are excluded.
You can claim through Self-Assessment tax returns (deadline: 31 January) and can do so for the current tax year and the previous four years. There are two approaches:
- Flat rate: £6 per week, or simplified expenses (£10-£26 per month depending on hours worked - minimum of 25 hours).
- Actual costs: Proportion of bills based on business use (e.g., 1/5 of a £1,000 electricity bill if one of five rooms is used as an office = £200 claim).
- If you would like help calculating your tax relief, please get in touch with us to discuss your personal circumstances in more detail.
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