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HMRC’s massive rise in Capital Gains Tax paid by landlords

New figures show that the amount of Capital Gains Tax raked in by HM Revenue & Customs has skyrocketed. 

The Revenue received £14.3 billion in CGT for the 2020-21 financial year, representing a 42 per cent increase from the previous period.

The £14.3 billion was paid for by around 323,000 taxpayers, a six-fold increase from the 53,000 in 2019-20.

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The period showing the increase coincided with many landlords being hit with additional costs and regulation, persuading an increasing number to sell their properties; the period was also one of substantial house price rises, also adding to CGT bills for landlords.

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. 

Shaun Moore, tax and financial planning expert at business consultancy, says three factors are driving this latest huge surge in HMRC’s tax take from capital gains. 

“Firstly … there were murmurings of CGT rates being brought in line with income tax rates, making it much more appealing to dispose of assets ahead of any change. Clearly this recommendation from the Office of Tax Simplification did not get enacted, but it did enough to spook people to bring forward their disposals ahead of any potential tax grabs. This recommendation is also likely to be entirely shelved until the next government decides what it is going to do with income tax rates as these seem firmly on the chopping block in order to help consumers.

“The more prominent issue is perhaps the fiscal freeze introduced by Rishi Sunak in the middle of the pandemic. Last year the CGT Annual Exempt Amount was frozen at £12,300 until 2026 at the earliest, and with inflation spiking and allowances following drastically behind, more people will be dragged into the scope of CGT.

“Finally, the reduction in lifetime limit for Business Asset Disposal Relief from £10m to £1m continues to do its job too, with just under 10% of the overall take coming from disposals that qualified for this relief.”

Moore continues: “Inheritance tax has been getting more attention than CGT in the recent Conservative leadership contest, but the tax raised from CGT dwarfs it in comparison. While tax rises do seem off the cards for now, it would not be a surprise to see CGT targeted if the next Prime Minister and Chancellor believe they need to raise tax revenues without impacting the majority of the population.”

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    Dear HMG
    Don't spend it too quickly. You'll be needing funds to house the homeless in all those grotty B&Bs and grotty hotels when there's nowhere left for them to live.
    Regards, all us ex-landlords

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    Just confirms that a lot of landlords are selling, they only get that CGT once per property, whereas while rented they get 20% (often40%) of the rent every year, I've always considered an income beats a lump sum

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    CGT on rental properties is pure greed. It's charged at a higher rate than for any other asset, 28% instead of 20%. Theoretically there's also 18% instead of 10% but most landlords have artificially been turned into higher rate tax payers due to how Section 24 works.
    Most assets can be sold off in CGT efficient bundles so a person's CGT annual allowance is best utilized. Houses can't easily be sold off in slices. It's all or nothing, so most years landlords don't use their allowance and then WHAM a huge CGT bill if we do eventually sell a property. If we've owned it for a few years and are based in the South that CGT bill can easily be £100K+ per property. Other countries have taper relief and eventually the CGT rate drops to zero.
    Throughout our ownership the government have received huge amounts of income tax from our rental income plus SDLT when we buy and VAT on all the repairs, renovations, safety checks, etc.

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    Agreed CGT is a tax on inflation, how can that be justified ?

     
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    The trouble with Govt is that its all about 'jam today' with no thought for the future :( They are certainly killing the goose that lays the golden egg - in terms of tax & housing.

     
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    Yes Tricia, real gains are made with long term investment, but politicians just want to be re-elected every 5 years , noses in the trough like the pigs that they are

     
  • George Dawes

    They spend it on such useful things

    Nuclear submarines, jet fighters and asylum seekers

  • Matthew Payne

    Another 6% of rental stock sold off. Government still not heard the wake up call, its pretty loud?

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    Hi Matthew
    I'm interested - where did this figure originate?
    Matthew

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    Only one person in this thread has actually enquired as to the source of the data. Fact check required, please.

    And "Shaun Moore, tax and financial planning expert at business consultancy" - that is not really an in-depth cv. Who is this guy, please? Where does he work?

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    Andrew seem your blog on some other section, that’s fantastic rent £ for £ not a hope in London where returns are rubbish and targeted by every useless person on earth .
    £100k 3 bed house in your area,
    return £468.00 pm x 12 = £5616.00 pa.
    Say £500k 3 bed house in London (but probably £600k) so in any case the purchase costs five times more, so you could have five houses for price of one giving you an annual return of £28’080.00 that’s £10k pa more than the same amount of investment in waste of time London with waste if time mayor who now wants to join the mob attacking LL. (£1500. pm what I am getting for 3 bed house x 12 = £18’000). Where’s my £10 grand + loaded with extra fees, rules, requirements & licensing.

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    Well Michael that's why I'm happy just to be a simple Norfolk boy with a simple 60s B stream secondary modern education, I've seen what these so called educations do for people, I certainly wouldn't change places with them, education is a con, street wise and common sense beats it every time, am I wrong ?

     
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    Andrew, not wrong a bit of savvy & natural ability goes a long way. The Towns built by some great trades people and the only certificate they had was a birth cert’. They learned from their elders on site and handed down if you like, often starting when left Primary School, (it would be called child labour now) the practical knowledge started from there, the guys spending 10 extra years in education will have all the theory but can’t get it in the hand even when they are 40.
    At the same time a bit of education can make life easier and avoid physical working.

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    CGT on landlords selling up is as much a windfall as a payday loan is.

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    Steve. I think its a very unfair system especially for older generation, you pay tax all the way along on the income, stamp duty when you bought, 20% vat tax on all services associated with it, tax on your Deposit money, now Section 24 taxing you on loan interest, 28% capital gains tax if you sell (0n inflation mostly), then 40% inheritance tax on the balance / remnants. Excuse me where is the opportunity to get out.

  • George Dawes

    Add up all the percentages and they come to 100 %

    Basically we’re all slaves now

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    You've hit the nail on the head there George! The wise way is spend everything and let the state pay for your care in the future.

     
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    George
    One's savings will deteriorate now by 10 % plus as we subsidize the financial people. Further young people are being lured into a debt trap, with dead end degrees and expensive tower block accomodation!

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    From where I'm standing the future looks bleak for our grandchildren in this country at least, many will leave the sinking ship called Britain, note I left off the Great

     
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