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Richlist

Possibility of CGT tax increase

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Seems the Gov' are looking at the feasibility of increasing CGT on property sales (currently 18% & 28% ) so they are inline with income tax rates.....20% & 40% & 45%.

I'm looking to sell a small property shortly.......I just did a quick, ' back of a fag packet' calculation to see what difference it would make.

The answer is it will add around £6000 to the CGT bill.

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The really worse thing that could happen is if the Chancellor brings in a sales tax on ALL property sales and this has been discussed more than once over the past 10 years by this Conservative administration and previous governments.

If he did do this then I would guess there would be a starting price level before any tax liability kicked in.

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Following on this topic by an update.

Who would be hit in a new CGT regime? 

"Landlords, savers and entrepreneurs could be in the firing line if the Chancellor follows through on the recommendations.

Tom Selby, senior analyst at AJ Bell, says: 'Landlords would be among the biggest losers from a CGT hike, as second properties are subject to CGT when they are sold. The same would be true for anyone who wants to sell a holiday home.

'Because second homes can’t be held in a pension or Isa and are difficult to sell in small chunks to take advantage of the annual exemption, a disposal is more likely to generate a significant CGT bill.'

Read the full article here.

https://www.dailymail.co.uk/money/investing/article-8945959/What-capital-gains-tax-new-raid-wealth-affect-you.html

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Another consideration 'may be', and this is merely my thoughts as to what's coming our way, is how local Gov't's  (I include the Welsh Assembly in that) will aim to generate higher income to attempt reduced economic impact due to Covid.

Westminster will have reduced capacity to offer support as the consequences of the awesome new debt becomes apparent.

If the nation/s see a depression that hits industry, productivity and employment then taxation possibilities are vastly reduced.

Those that are trapped in their ownership of whatever responsibilities they hold are, in my mind ,obvious targets.

Leisure assets like holiday homes/ lets, caravans, and boats are easy targets. Of course so are we. I envisage that these councils will develop an imagination as to how we may be charged independent of our T's that live there. Are such as 2nd council tax charges possible? Might we see moves closer to revenue charges rather than profit, we have already seen an introduction to that.

We are expecting an exodus of those that aim to beat any 'rumoured' CGT increases. That will depress the market some and the choice then is to ride it out or take a hit on value.

To ride it out there is then a chance of becoming trapped. Depressed values deter the sales as phytologically that feels like a big loss even if there is still positive equity. Any later loading on our profits might leave us regretting the ride it out decision.

Just thinking aloud and interested to hear what others whirring cogs are producing.

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Well....the old question still comes to mind.

Where else are you going to put your money to give you a better return ? Even with an increased level of CGT and perhaps other attempts to eat into profits we are perhaps still getting a better return than elsewhere.

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10 minutes ago, Richlist said:

Well....the old question still comes to mind.

Where else are you going to put your money to give you a better return ? Even with an increased level of CGT and perhaps other attempts to eat into profits we are perhaps still getting a better return than elsewhere.

Precisely.   That is my situation in January 2021.  I will probably keep the property going in the hope I can find a good tenant. It's a minefield out there at the moment with all the planned redundancies in my location and lack of any job security.

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Agreed, as a source of revenue it remains attractive. How much of a hammering by legislation and additional charges before that becomes not so is very dependant on personal situations.

There is a continual strategy to increase our responsibilities regarding T's and so reduce the cost to the state. As well as increased costs this also loads us with more bureaucracy.  And I actually have great issue with the disproportionate and many penalties that we are at risk from. The courts are a joke and pretty much give all sympathy to the abusers, the stress from this can be considerable. So it is far from being as simple as being able to make more money from this than other (reducing) possibilities. 

I guess what I am considering with the many known and unknown possibilities is what risk to reward scenarios are likely.

 

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This handy Government HMRC Capital Gains Tax Guide is useful in calculating personally your tax liability even if you have your own accountant.

https://www.tax.service.gov.uk/calculate-your-capital-gains/resident/properties/

I have used it and even with the capital allowance relief of £12,300 (plus the Spouse) it will still mean a large chunk of cash payable by me (us) if I sell my property in January which means I probable won't BUT I can definitely see the Chancellor reducing down the Capital Gains relief to around £5,000 next year...... or next budget.

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Many newspapers and websites are now reporting this. I believe this will happen in 2021. 

 
mail?url=https%3A%2F%2Fd10hbub4nkludc.cloudfront.net%2Fimages%2Fspacer.gif&t=1606893352&ymreqid=73ca211f-ff3e-70c1-2f37-ea001d01be00&sig=fX8zpblDEMegpfr_.HIZBw--~D
 
mail?url=https%3A%2F%2Fd10hbub4nkludc.cloudfront.net%2Fimages%2Fspacer.gif&t=1606893352&ymreqid=73ca211f-ff3e-70c1-2f37-ea001d01be00&sig=fX8zpblDEMegpfr_.HIZBw--~D
Capital Gains Tax Looks Set to Rise

A government report from the Office of Tax Simplification has raised expectations that capital gains tax (CGT) rates are set to rise.

Landlords must pay CGT on any gain in the value of their property when it is sold. Currently, CGT on property is at 18% for basic rate taxpayers and 28% for higher rate payers. The tax must be paid within 30 days of the completion of the sale.

The report suggests that CGT should fall into line with income tax. Income is taxed at 20% for basic rate and 40% for higher rate payers. For the latter, this would be a significant increase in the amount of tax paid when selling buy-to-let properties.

The report is released at a time when Chancellor Rishi Sunak is thought to be looking for ways to increase government revenue without breaking the Conservative pledge not to increase income tax, national insurance or VAT rates.

This ‘triple-lock’ pledge leaves little room for manoeuvre, making it likely that CGT, which currently contributes just £10bn to the Treasury, will rise.

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