New figures show that buy to let landlords quitting the sector or at least reducing their portfolios have helped the government pocket a record sum in Capital Gains Tax.
Buy to let is cited as one of three reasons why the UK’s CGT bills jumped 20 per cent from £10.8 billion to a record high of £12.9 billion in the 12 months to the end of January.
Other reasons include the cut to Entrepreneurs Relief, costing some business owners millions in extra tax when they sell their stakes, and the stock market rally in 2021, when the FTSE 100 rose 42 per cent from its pandemic trough.
Phil Kinzett-Evans of accountancy firm UHY Hacker Young says:“This is a very sharp increase in CGT largely paid for by an increase in taxes on entrepreneurs selling businesses.
“The last year has seen some entrepreneurs pay seven-figure sums in extra tax they weren’t expecting. Entrepreneurs’ Relief was a vital incentive for individuals to start and build businesses and the 90 per cent cut the Treasury introduced has hit hard.
“A lot of entrepreneurs accelerated plans to exit their businesses when rumours of the end of Entrepreneurs’ Relief started swirling in 2019 and 2020. Those who did saved themselves millions in tax by doing so.
“The red-hot housing market of the last 18 months was also a great opportunity for buy-to-let investors to sell properties and benefit from the equity they had built up.
“Add that to a great rebound from the start of the pandemic for the stock market and HMRC has had a massive year for CGT bills.”
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We take all the risk, they take a huge chunk of the money. Nice work if you can get it. Capital extortion would be a better name for it.
Capital punishment more like
Enjoy your CGT Rishi and don't spend it too quickly. The consequences of those landlords selling will be less houses to rent. The temporary accommodation bill will be expensive
My thoughts exactly. Councils are begging landlords to help house all and sundry. These people have to be provided with somewhere so the hotel bills must be astronomical without private rentals being available.
The government is acting like gangsters and raiders
Don't forget, you only pay tax on profit. No profit, no tax. So if you have a big tax bill, you've done well!
Not true with respect to CGT as it is not index linked to inflation. So you’re actually getting taxed in the main, on the drop in value of the pound against your property rather than actual profit.
If I double your money but at the same time, the price of everything doubles would you consider that a profit? You’d be no better off. But if I said your doubling of money needs treated as profit and taxed then you would actually have less spending power than you had before your money was ‘doubled’.
The old 'you must have made a profit if you're paying tax' fallacy. Another example of how left wing ideas and responses are always (and deliberately) oversimplified to the point of stupidity.
It's not about profit, it's about an amount of profit reflecting the investment, the risk, the hassle, the time, the emotional toil and everything that goes into it. If that profit doesn't reflect what has gone into the endeavour, then people will simply stop doing it.
Justifying a record tax bill by saying 'you made a profit' is like justifying underpaying an employee by saying 'you got a wage'. The value has to be reflected in the exchange, or it is economically unsustainable.
Big rise in Capital Gains Tax take, so it follows also Big Rise in Stamp Duty Land Tax take, when is Government ever affected.
John Young you sure are clever! Most taxes have nothing to do with profit and council tax is a medeival system where they will take the money from you what ever.
Business rates is even worse
Absolutely. Taxed on the rentable value of the bricks and mortar that your business happens to be in whether you make a penny in profit or not. Only bureaucrats could come up with something so ridiculous and claim that it's justified.
Hay George, I think you're in the wrong business. How about a positive comment.
John Young, how is the communist party today?
It’s called reality John , try visiting it some time
I guess if it is so tough and unfair for landlords, they will just sell up and quit.
On this you are correct and is the point many above have been trying to make. Landlords have been selling up, or converting to short lets such as Airbnb in large numbers. This is why many areas in the uk have a chronic shortage of rental properties and rental prices have been rising due to the huge competition to get even a half decent property.
My son was a LL then sold up and now puts his money in the stock market. No hassles and no tax as the money is in tax free isas.
With the stock market today, he is likely to be making heavy losses.
It may be tax free, but when it crashes, your money goes down the pan.
First, he invests across 100's of companies. Second, when the market crashes he rubs his hands and invests more. You only loose your money if you sell when the price is low, he is in it for the long term. He is making anything between 10% to 20% per year.
I turned a £6000 deposit on a £60k BTL flat into a £4 million portfolio over around 30 years with over £3 million equity and £300k gross rental income, up from £250k last year.
I have accidentally avoided CGT and IHT on most of this as I bought most in my kids' names principally to avoid me paying a huge tax bill and fund their University education with their tax free rental income. I now charge my kids management fees to avoid the highest tax rates being paid by them.
My kids plan to do the same for their kids and my own estate will leapfrog my kids straight to the grandchildren to avoid future IHT on it if it was inherited by my own kids and subsequently by my grandkids.
Using this type of gearing by investing in the stock market is highly risky and I challenge anyone to demonstrate how a £6000 investment can grow 500 fold over 30 years whilst returning more than 100% of the original investment from year 1 onwards.
The red braces brigade are too well off for the investors to be getting the best deal available on stocks and shares.
Heard it all before.
He definitely wouldn't be making anywhere near that now.
Even professional investors are way down in their portfolios.
He must be one off a kind, maybe the next Warren Buffett, but I bet even he is losing money right now.
Robert. Congratulations I like to see everyone doing well never jealous or envious. I haven’t the benefit or burden of further education so I grapple with returns and yields. £3m equity x 10% = £300k pa. Profit less running costs, Licensing, Accountancy + vat, Insurance + 12%, General Maintenance, other Regulatory requirements, How 2 Rent / Right 2 Rent costs, Certificate’s annual & 5 yearly, Deposit burden costs, c/tax in HMO’s, Agency fee if used + vat, Advertising, Tenancy Agreement’s, any Service Charges, Ground rents etc, (excluding Epc’s nightmares).
Do I take off those before I arrive at a profit before tax, returns, yields or what ?.
In any case £ for £ you are 3 times better off then me in L’don with your investment well done. Please someone enlighten me.
I too am glad to see anyone doing well out of their own hard work, but there are always those that sit on the side lines getting hung up, bitter and twisted when they see some one else doing well
I think a big factor is that you should be doing what you enjoy. If your not making a lot of money, but you love what you do and your happy, them that's great.
That I do agree with 100%!
Yes John I agree, from starting work aged 15 I have always enjoyed going to work and still do
Hi John, them days are well gone no enjoyment now just absolute torture with Rogue Regulators hitting us from all angles, so much bullying , lies injustice’s, legalised robbery, fines, penalties, confiscation Orders, banning Orders, criminalisation of Landlords, deposits farce, how2rent, right 2rent, unfair taxation, and a raft of other impediments. Looks like you haven’t been hit yet or have an unusual sense of humour.
I am not a professional landlord, more of an unplanned one. We managed to move our home without having to sell our previous one, so rented that out. Then when our son was away during his internship in University we decided to buy a property rather then him renting one, when he left we rented that out. We use full management agency to look after the properties, so have very little to do with the day to day running. Yes, all the regulations etc. eat into the profits but we do get a boost to our income and when the time is right, we will sell.
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