Chancellor Rachel Reeves’ tax hike rumours fuel anxiety in PRS

Labour explanation of capital gains tax increases will probable be along the following lines:
Most landlords of modest means will only see a small increase in CGT from 18% to 20%.
Well off landlords who are 40% income tax payers will see their CGT increase from 28% to 40%.
This demonstrates Labour tax policy of only increasing taxes on those most able to afford them.
This of course ignores the fact that in many cases, because capital gains are in effect added to income for that year, many standard rate tax payers will pay at least part of their CGT at the higher rate.
It is bizarre that even though any capital gain is counted temporarily as income to bring in more people in to the higher CGT rate, you can't give the amount of this capital gain away,(even net of CGT paid) to children and count it as gifts out out surplus income for IHT purposes. No - having served its purpose as income it now reverts to being capital again and as everyone knows if you make gifts from capital you have to live 7 years for full IHT exemption.
It also ignores the fact that in many cases CGT is just a tax on inflation increases. We are just selling a holiday let which has doubled in price over 22 years. Most of this increase is just inflation.

And additionally Section 24 is pushing many landlords into the higher rate band artificially.
Some of my rental properties I’ve owned for 25 years+ so the gains are quite large. I’m only really a basic rate tax payer but artificially in the 40% band. Some of my gains will be taxed at 45% ……for a basic rate taxpayer. All the years I’ve spent managing tenants, weeks of decorating between tenancies (which cannot be claimed against tax as I’m not incorporated) and these cheeky beggars want 45% of what I’ve made …..which has mainly been like you say due to inflation. I think Labour will see this as a tool to stop landlords selling up. I wouldn’t put it past them to continue the extra CGT for property, perhaps a flat rate of 60%. You have to remember these lot are far left marxists and I wouldn’t put anything past them.

Reply to the comment left by Dylan Morris at 13/08/2024 - 11:39I think we can take some comfort in the fact that the actual tax take doesn't go up in line with the rate. Pretty sure that even a change to the income tax rate would cause a drop in the actual tax take, let alone something obscene like 60%, simply because you can choose when, or if, to take a capital gain.

Reply to the comment left by Dylan Morris at 13/08/2024 - 11:39
Hi Dylan
Your comments mirror mine with 30 years of looking after the houses painting /kitchens /bathrooms/ carpets
New Appliances and managing the tenants needs what has the governments done for there cut Absolutely nothing
As you say, a lot of the gains are inflationary they never take this into consideration. We are just looked at as a cash cows if you are a soletrader.
As we are pushed into high rate tax artificially because of George Osbourne section 24 i’ve just sold a house and paid the Government a handsome sum of £48,000 and that’s at the low rate of 24% you needed
To Refinance to make any business grow so when you do sell you’re paying off the interest only Mortgage first then the government, then you get what’s left and if they do increase in line with Tax not very much for 30 years
Also, the vultures are circling for landlords who now want to sell quickly before October 1 if they bring in the capital gains hike immediately and effectively make it impossible for us to sell this government is so far left-wing it’s unbelievable that people voted them in. Rachel Reeves saying about the 22 billion black hole she knew all about this in January and to come in and say I’m shocked how much debt we’re in again just absolute liars,
Sorry, so we’re gonna have to tax you now much more than we thought it’s the others fault not mine,
It was the labour government in 1997 that decimated the pensions market and made billions from it that was how the modern buy to let was born as people looked around to secure their future pension, and Now this lot want to rob you of it all .
And what about all the money that will be needed if we need Epc’s to be C rated an average terrace house could cost £20,000 for a small cut on the gas electric bill for the tenant per year and I’m alright in saying that social housing will not have to comply and local councils.

This idea of 'aligning' capital gain with income tax is ridiculous in itself. If you paid all your income tax for all the years you'd worked in a particular job in the year you changed jobs with only a 3k nil band that would indeed be an alignment. It would also result in an uprising.

Last time we had a Labour government we had taper relief which was a fairer tax.
Rachel Reeves proclaims that she wants a thriving economy so why then does she want to introduce punitive tax laws and stifle growth.
Labour are on course to collapse the economy!

Reply to the comment left by Jack Jennings at 13/08/2024 - 14:45Labour's thinking surrounding the morality or the the justification for aligning capital gains tax with income tax would probably be something like:
Capital gains are something which just happens without any input from the investor. You are just lucky, you haven't had to work for it, it's usually just a pleasant bonus to an investment you make.
To be honest, when we start renting property we all usually expected/hoped for some capital appreciation.
There are very few investments which can guarantee capital gains. Surprisingly one such investment is run by the government. If you buy the right bond then if you wait until maturity then a capital gain is guaranteed when the bond is repaid. Also there is no CGT to pay.
Bonds issued by the UK government (gilts), are exempt from capital gains tax. The exemption from capital gains tax extends to options and other contracts to buy or sell gilts.
IMO CGT should be like in the 1970's, if any tax is to be paid, then it should be based on the capital appreciation after taken inflation has been taken in to account.
To minimise CGT the way I have transferred investment properties over the years to family members over the years is in stages. e.g. 20% each year for 5 years. It does cost a bit in legal fees but in the past we have been able to benefit each year from £24,600 (2 x £12,300) annual CGT exemptions and also making sure a good portion of our tax being paid at the the lower 18% rate. Now the CGT exempt amount is only £3,000 not sure whether this is a worthwhile strategy

Reply to the comment left by Dylan Morris at 13/08/2024 - 11:39
Property is theft, or so they say, so they probably think they are just taking back the benefit that the landlord should not have had in the first place!

Reply to the comment left by Dennis Forrest at 13/08/2024 - 10:59
Do they intend to treat your capital gain as included in yearly income? £100k capital gain added to your regular income would put you in the highest tax bracket.

Reply to the comment left by Tony Clements at 14/08/2024 - 11:13
Yes that’s exactly how it works at the moment. Although the CGT rate is 18% for the part that is within basic rate income tax and 24% for the part that is within 40% and 45% income tax.