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Capital Gains Tax cuts for landlords considered by government - report

A report in a government-supporting newspaper suggests that a proposal to cut Capital Gains Tax for landlords who sell to first time buyers is being considered as a way of increasing the number of owner occupiers.

The Daily Mail - often used by the government to float future policy initiatives - says: “The ideas, in the very early stages, aim to make it easier for younger people to get a first foot on the housing ladder. There is growing concern they cannot buy a home as too few are coming to the market, meaning they are over-priced.”

CGT is tax paid on the profit of the sale of any additional home - a buy to let or a holiday cottage, for example - and currently the rate of tax stands at 18 per cent for basic rate taxpayers and 28 per cent for those in the higher rate threshold. There is an annual allowance on which no CGT would be paid. 

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You can’t reduce the percentage of tax owed on the capital gain of your investment, but you can minimise the sum. By taking into account costs incurred on the property, either when purchasing it or during ownership, you can boost the ‘initial cost’ of your investment and reduce the capital gain of any price appreciation.

Costs included in this respect range from legal fees, stamp duty and even mortgage broker fees when you purchase the property. To other costs such as the refurbishment of the property, the addition of more space via a conservatory, for example, and even the cost incurred researching the title of a home.

There’s been a huge rise in CGT paid by buy to let landlords quitting the sector or at least reducing their portfolios. 

Buy to let was 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 this year. 

Other reasons included 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. 

 

The latest Daily Mail report on incentives to sellers also suggests that a possible stamp duty incentive is being considered for older owners who downsize, disposing of their property to a first time buyer or so-called ‘second stepper.’

The issue of older owners ‘under occupying’ property has been around for many years.

Three months ago research by Professor Les Mayhew of the International Longevity Centre and Bayes Business School, showed that over-75s in London had more than twice the number of bedrooms they needed, while the 65 to 74 population had 70 per cent more. 

Alongside that, separate research from the Greater London Authority suggested that 26 per cent of homes in London are under-occupied.

Want to comment on this story? If so...if any post is considered to victimise, harass, degrade or intimidate an individual or group of individuals on any basis, then the post may be deleted and the individual immediately banned from posting in future.

  • Rik Fergusson

    If they cut ctg I'd definitely offload a few places, especially with tough epc rules coming.
    It would further reduce the availability of rental properties for low income families but since the government dont really care about that anyway and are only interested in taxing landlords into selling then happy days.

  • PossessionFriendUK PossessionFriend

    Turning the cooker down After you realise you've burned the food isn't going to make it taste better. !

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    They haven't burned the food and they're not turning the cooker down. Getting landlords to sell is exactly what they wanted from the start. This is a disguised bribe to make landlords think it's a good idea.

     
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    The government need to stop inventing complicated divisive policies in the property market. Every policy they come up with has unintended consequences. Go back to the old days where all buyers and sellers are treated the same.

    Section 24 has made far more landlords higher rate tax payers than would be the case if rental profits were determined in the same way as for every other business. Therefore 28% CGT is completely extortionate. Most other assets can be sold in smaller lumps to best utilize CGT allowances. Selling quarter of a house is tricky.
    We have already paid huge amounts of SDLT, income tax and VAT throughout our period of ownership. Reducing CGT and reintroducing taper relief could be easily justified and would massively boost the number of houses for sale if it was applied universally to the sale of all BTLs regardless of buyer status.

    The extra 3% SDLT on all BTLs costing more than £40000 has incentivised us to buy more bottom end properties that would traditionally be FTB territory. Especially in the South. Buying one HMO for £500K would give a SDLT bill of £30K. Buying 2 small houses for £250K each gives a SDLT bill of £20K.

    Help to Buy pushed FTBs to buy much bigger new builds as their first home, which is going to have some very painful consequences when they need to remortgage if interest rates keep rising.

    It doesn't matter what CGT cuts are proposed if they are conditional on the status of the buyer. How many of us would be willing to play the hunt the proceedable FTB game? Property transactions are a serious matter. We need to know the tax implications before we embark on them.

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    Very well considered post, Jo. Any policy makers considering this should read it

     
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    I agree - different rules for different players is unnecessarily complicated and always has unintended consequences. Why should FTBs get all the help? What about 2nd steppers who need a family home?

    CGT should be indexed linked to allow for inflation or at least have taper relief re-instated so that long term ownership is not penalised. That would make it more attractive to sell properties instead of holding them until you die to avoid paying CGT & IHT.

     
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    Morning All, Can anyone answer my question re CGT.
    I have just sold a property back to the council because they have plans to demolish the block. On top of the purchase price, they paid me a Home Loss Payment of £19,000. Do I have to pay capital gains tax on the £19,000?

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    Surely the solicitor who dealt with your sale would know? Or if they don't know they should find out from HMRC?

     
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    Well I am selling anyway, this would be very welcome though, mine will go to FTB”s as the EPC is low, the only good news I have heard in a while 👍🏻

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    What about the other unintended consequence? In London Landlords' are selling up in droves due to unfair taxation of rents, HMO and the threat of other regulations such as EPC minimum C.

    I am an agent and in my area of NW London I would say around 70% of what is on the market is ex-rental stock, this is causing a shortage in supply and rental prices are going up massively.

    We are getting multiple offer / over asking in some cases. A drop in CGC to encourage more landlords to sell will only cause further rental stock shortages and higher rents. Ultimately meaning it will take longer for a FTB to save for a deposit.

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    Chris - while CGT, SDLT and IHT are all so high landlords tend to hold on to the properties they have for longer than they want or should.
    Some have thrown in the towel and decided to quit but most can't stomach the tax take.

    When I started out around 25 years ago I used to buy run down wrecks, renovate them, rent them out for 2 or 3 years then sell them usually to FTBs. Now the extra SDLT has stopped that being viable. £10K goes a long way towards a new kitchen and central heating.
    If we have owned stuff for 20 years or so the CGT can easily be around £100K in the South. If we sell and then inadvertantly get run over by a bus shortly after the government will get both CGT and IHT on the same asset. Also if we didn't have to pay such eyewatering CGT and SDLT we would be more likely to buy more properties to rent out and increase the rental supply. If I sold just one of my mid size properties right now it would provide sufficient deposit to buy 3 or 4 more houses. Either new build or renovation project. Either way increasing the supply of habitable housing.

     
  • martin grace

    Little to late I have decided to sell All my properties I rent stricter rules and registrations imposed on private landlords and tax relief make it not worth the effort so I have decided to retire from the rental market the government can now rehouse them on there costs not mine if private landlords were looked after a bit better by the government I’d have carried on

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    Fair Argument Jo. I not saying the CGT isn't too high I'm and as a landlord and this is why I have held for a similar time to you.

    But there is no escaping that rental stock is at at all time which is due to government policy towards landlords and the rental sector and a drop in CGT without changes to bring landlords back into the market.

    I also can't see a drop in SDLT anytime soon especially for second homeowners / BTL Also pretty sure your estate wouldn't have to pay CGT and IHT if you did get in the way of a bus.( Heaven forbid)

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    CGT no (on properties still owned as CGT currently dies with you), but potentially a huge IHT bill

     
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    If someone had bought a house for around £65000 back in the early 1990s and it's now worth £500000 by the time selling costs have been factored in they would be looking at a CGT bill of around £114000.
    So they would pocket about £375000 if they sold. They almost certainly have other assets such as the house they live in, investments, maybe other BTLs. If they then got hit by a bus it's fair to say 40% of the £375000 would go in IHT as there hasn't been time to give it away or spend it, so that's another £150000 to the government in IHT on top of the £114000 in CGT they had recently received.

     
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    It still won’t reduce the price of the houses!

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    Jo. I turned this scenario over in my mind but can’t come to a sensibly conclusion although I have by told I should be doing this, that and the other yet have no confidence whatsoever in anything I have been told.
    Suppose I sell now and pay the 28% capital gains on the sale less original price & costs. Then even if I had given it away and died / or got hit by Jo’s bus, say after 3 years the huge Capital Gains that I have already paid is washed away and forgotten about. It will then come back into my Estate for Inheritance Tax Purposes on the whole at 40%. To me it looks better not to sell and pay no Capital Gains at all, obviously the two taxes added together is going to be more than the one tax at 40% at the end. We are held to ransom and crucified what ever we do.

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    Precisely. When taper relief was removed our retirement plan effectively disappeared.

     
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