There’s a warning that buy to let investors will simply hold on to properties and not sell them if rumoured Capital Gains Tax changes go through.
Chancellor Rishi Sunak has asked the Office of Tax Simplification to review CGT, with a consultation now underway and any changes scheduled to be announced in the autumn statement in November.
That will have a significant impact for property investors, second homeowners, shareholders, entrepreneurs and family trusts, says financial consultancy Kreston Reeves
Jo White, a director in the Tax Advisory division says: “The government has made historic levels of spending into the UK economy to help businesses and individuals through the Coronavirus pandemic.
“We know that a review of taxation was likely to follow and Capital Gains Tax, much overlooked in recent years, is an obvious and easy place for government to start.”
She adds: “Buy to let investors with portfolios held personally or in corporate structures will feel these changes if they look to sell parts of their portfolio or shares in the company that holds property.
"Property investors have been the target of many recent tax changes and may feel unfairly targeted at a time when they are facing Covid-related rent holidays from tenants.
“Individuals with a holiday or second home could face, if they are an additional rate taxpayer, a CGT rate of 45 per cent on any gain from the sale of property and will have just 30 days to settle any liability.”
White calculates that many BTL and holiday home owners will inevitably choose to hold on to property seeking rental incomes instead.
She concludes: “It is interesting to note that the government is trying to stimulate the property market with its Stamp Duty holiday, but in playing with CGT rates may hold back parts of the property market that are typically active.”
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Holding an asset you don't want because of its tax treatment sounds highly unlikely. I question this as fake news.
With skin in the game (100+ properties) and having had this very conversation yesterday, I would not sell if required to give more away. Surely you understand that this would, at absolute minimum, discourage even some that would perhaps have otherwise considered selling. It’s not emotive, rather logical.
I totally agree with the author, at a higher rate of CGT it makes more sense to refinance if you require income than sell at punitive CGT rates.
Historically, when a government requires income quickly they LOWER the CGT for a period of around 24 months, this encourages sales and income.
The rate then reverts back for several years.
Old fashioned,common sense economics
This would be preferred by all members
Historically rates were not liable on empty properties so they were often empty for years. Not any more. It can be better to sell as fast as possible if a property does not readily let.
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