Potential CGT changes could cost landlords £11,000

Potential CGT changes could cost landlords £11,000

0:06 AM, 6th August 2024, About 4 months ago 13

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The UK’s landlords could be £11,000 worse off on average if capital gains tax (CGT) rates are adjusted to match income tax rates, research reveals.

Quilter, a wealth management and financial advisory firm, says this potential change, although not mentioned in Rachel Reeves’ recent House of Commons speech, could be part of broader measures to address the £20bn funding gap.

Currently, homeowners benefit from private residence relief, exempting them from CGT when selling their primary residence.

Subject to CGT on any profits

However, landlords and those with second homes are subject to CGT on any profits from property sales.

Under the existing rules, basic-rate taxpayers pay 18% CGT, while higher-rate taxpayers pay 24%.

If CGT rates were aligned with income tax rates, these figures would rise to 20% and 40%, respectively.

‘Tight lipped on its plans surrounding CGT’

Shaun Moore, a tax and financial planning expert at Quilter said: “During Labour’s election campaign the party was tight lipped on its plans surrounding CGT.

“While senior Labour figures were forthright in their conviction that the party would not raise national insurance or income tax, no one was willing to get drawn on what it might do to other taxes such as CGT.

“If plans such as aligning CGT with income tax rates do become a reality, then we could see some significant repercussions in the short and long term.”

‘Homeowners rush to sell their second properties’

He continued: “Unless anti-forestalling measures are announced with any plans then we could see a surge in property sales as homeowners rush to sell their second properties before new legislation comes into place.

“This could temporarily boost housing market activity, and many people will reconsider their property portfolios, potentially shifting their investments to other assets with more favourable tax treatments.”

Mr Moore added: “The truth of the matter is though; at this point nothing has been announced and unless selling a second home or a buy to let is already part of your plan then making decisions based on what might happen is not sensible.

“However, these figures do serve to illustrate how much more tax might have to be paid in the future should this policy proceed.”


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Paul

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9:59 AM, 10th August 2024, About 4 months ago

Only £11,000. I wish. I was buying stuff 30 years ago. 24% Brill. 28% Ok, thanks. Pushing to 30% I'm just not going to sell. This will put a hard stop on these sales. We will just wait for a change in government. Wait for the rates to go down a bit and put a BTL and pay no tax, invest the money in Tax efficient wrappers. Always a solution to a problem.

Reluctant Landlord

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10:14 AM, 10th August 2024, About 4 months ago

So landlords don't sell. Everything remains as is.
0 GCT for the government.
Tenants in situ are not given the option of buying from the LL and continue to rent.
There are no smaller properties available for possible downsizers. That in turn does not release any larger properties for families to buy.
No incentive for private landlords see a reason to invest further - remember private LL's buy properties the B2Rent/B2Let corps are not interested in (bungalows, out of town properties, family houses). The rental market for family houses stalls yet demand increases.
Landlords stay in the market but only now rent to low risk candidates (ie none 100% state funded) . Market rents rise as supply is reduced further.
Benefit tenants are completely out of the running as they cant meet affordability. The temp accommodation bill increases ever higher.
Private paying Tenants are stuck where they are - no options to rent elsewhere if a new job/location comes up.
The housebuilding market stalls. Who's buying?

Paul

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10:48 AM, 10th August 2024, About 4 months ago

Reply to the comment left by Reluctant Landlord at 10/08/2024 - 10:14
I'm not buying, not because I don't want to, it's because the market is not conducive to doing so. It's not the interest rates, it's the legislation and effective taxations. Otherwise, I'd be happy to do what I have in the past, buy crap houses first time buyers just cannot buy ( either unmortgageable or too much work ) and get them refurbished and back into useful work.

However, making legislation more aggressive, increasing taxation looks good to the voters labour ( or any Govt ) might want to appeal too. Alas, these voters do not comprehend the consequences of what, on the face of it seem like good ideas.

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