Rise in CGT will affect the Property Market

 

A rise in Capital Gains Tax (CGT) has been a hot topic for some time now, since the new coalition government came in to power, and we all wait with baited breath to see what the actual changes will be.

 At present CGT is 18% with taper relief but it has been suggested that this may rise to as much as 40% with no taper relief.   CGT is payable on second homes or investment properties. If CGT increases to this level, people may continue to sell their second home or investment property  but it is likely that many will be deterred from investing in property in future viewing it as a less solid investment compared to previous years. An increase in CGT will, very likely, have an impact on the property market, for at least a short while, while potential property investors assess whether it is financially viable investing in property. It may still be an option in the long term but for those looking for a medium term investment it will not be so attractive.


The ‘Telegraph online’ today reports:


The Coalition is planning to increase capital gains tax from 18 per cent to “closer” to the 40 per cent higher rate of income tax. The tax increase will only be levied on so-called non-business assets such as shares, second homes and buy-to-let properties.
There has been a widespread public backlash against the plans and several senior Conservative MPs including David Davis and John Redwood have openly attacked the proposal. More than 17, 400 readers of The Daily Telegraph have signed a petition against the planned rise.

Click here to view the full report.

 

Nationwide have said that there could be ‘panic selling’ among the UK’s 250, 000 second home owners and owners of more than a million buy to let properties if CGT were to increase. This would have an impact on house prices bringing them down which would be good for buyers, however, it is difficult to know how long this would last.

It all depends on when the proposed changes to CGT are to be implemented. The property market is still relatively fragile and a drastic change to CGT regulations, at this time, could prove damaging.


by admin
Monday 14th of September 2015 09:34:29 PM