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Labour Capital Gains Tax Threat - a lawyer’s advice

The Labour manifesto has made no mention of Capital Gains Tax, and while Sir Kier Starmer has ruled out many mainstream tax rises he has repeatedly refused to rule out potential CGT increases. 

In light of this, James Austen, partner at Collyer Bristow law firm, has given a view on what this might mean in practice and what people should do now to prepare for potential future increases:

He says: “While not one of their manifesto commitments, Labour has not ruled out increasing CGT rates.  In fact, Sir Kier Starmer has repeatedly refused to do so when questioned on it during this election campaign, and Rachel Reeves advocated a CGT rate rise in a 2018 pamphlet, so it remains a definite possibility notwithstanding the manifesto’s silence.

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“If Labour were to raise the rate of CGT - potentially bringing it into line with income tax (currently, a maximum of 45%) – this could even come as soon as an emergency budget in the first few weeks of the new government.

“Though not a particularly large source of tax revenue, raising CGT rates could nonetheless provide a Labour government with room for additional spending, which would otherwise be difficult to fund given the party’s promise not to raise VAT, National Insurance or income tax.

“Traditionally, CGT rates are fixed for the whole of a tax year, from 6 April in one year until 5 April in the following year.  However, there is precedent for an immediate mid-year CGT rate rise: George Osborne did this when increasing CGT from 18% to 28% in 2010.  

“As a result, taxpayers with assets standing at a material gain might wish to take advice on triggering disposals of those assets at current tax rates before the election on July 4.”

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    I listened to Angela Rayner last night when she appeared in the ITV election debate. She was asked about capital gains tax by Penny Mordaunt and it didn't sound as if Labour would raise that tax, at least not early on (as suggested in the piece above), if they take over. Angela Rayner stressed that there was nothing in their manifesto which required them to raise capital gains tax. You can listen to that/her on Youtube at 1 hour 22 minutes. Just search for Live Coverage of Election Debate 13th June 2024.

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    Do you take Angela Rayner seriously ???

     
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    She is quite likely to be the Deputy Prime Minister in two weeks times.

     
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    What she said was the manifesto had no mention of it…. Not that the party had ruled it out 🫣 a small but important difference.

     
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    I think that she does say that actually at 1 hour 22 minutes 25 seconds, Simon.

     
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    A quick Google search shows the Times and others saying “ she has not ruled out applying CGT to residential homes or it’s rate”, I will rewatch tonight what she said word for word, but given her patchy history when it comes to paying tax 🤔 I will hold my faith in the Labour rabble.

     
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    It is only a fleeting "yes" on the question of ruling out raising capital gains tax, Simon.

    Penny Mordaunt wasn't satisifed with Angela Rayner's response.

    Angela Rayner was very clear about not raising tax for WORKING people. Labour seems to be under the illusion that letting property doesn't involve a great deal of work.

     
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    Forgive me but I fail to see the hindsight of this advice:
    " you want to avoid Labour's increase of the CGT ? Then sell before !"
    Cheers mate, my 15 year old cat (not the sharpest tool, bless her!) could have come up with that !

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    And it would be almost impossible to get everything through by July 4th, to avoid it.

     
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    Initially there will be a review by the OBR, so I do not anticipate any change until the Autumn budget, some months away. Any emergency budget smacks of panic and will be seen as politically unacceptable. However I feel there will be a rise in rates, so selective disposals advised. In any case this is a discretionary tax, and if raised too high will result in a fall in revenues, as inheritance tax is 40%, why would anyone pay both.

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    Since you can't sell a house on a whim it's too late to take action now. We will all have to sit tight & see what a Labour Govt brings.

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    Sadly 🫣 I agree 🥵

     
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    I don't think that you would get a property into an auction until late July now.

     
  • Rob NorthWest-Landlord

    I think Labour will do what the Conservatives did when they got in, big announcement about how there is no money left and everything is far worse than they thought. Emergency measures to tax everything they possibly can that they don't already, and increase taxes on anything they can get away with.

    Any tax that can hit the rich fat cats (not the real one's, obviously) like unscrupulous landlords and big business will be fair game. The benefits brigade will be celebrating with more cost of living crisis payments before you can blink.

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    You only pay CGT on a gain, and so to avoid paying the current rate, or an increased rate of CGT, keep hold of the asset and don’t sell, thus depriving the Revenue of any tax at all. I for one, won’t be paying any CGT as I intend to hold.

    There was also a moderate sell-off of equities yesterday on the back of the CGT speculation.

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    There is a lot of council tax to pay if you leave a number of properties empty.

     
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    Yes, if this were to happen then I would really have no choice but to hold on to assets, especially those that I have held for a long time and would attract the most CGT.

     
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    When taper relief was abolished I accepted I would be a landlord until I die.
    I've owned some of the houses for around 25 years, they're located in the South and paying £100K per house CGT is basic theft.
    If indexation relief was introduced even if the gain was at my marginal tax rate it would be far more palatable than the current system.

     
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    Another way would be to re-model property to a maisonette. Sell one and keep the other. Not suitable for all properties, however you can reduce your debt and still have a property let.
    Not for everyone, but those of us mortgaged may need to think out of the box if they did raise CGT.

     
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    If they raise CGT on BTL and 2nd homes, then many people who can hold off selling property will do so. This will reduce supply and support price increases. Thus making it more difficult for first time buyers. Especially as many ex rentals are attractive to FTB as commonly more affordable than other properties. That's why the current Govt has reduced CGT (not by enough mind you) to encourage us to sell up. Also of course the treasury won't achieve the increased tax revenue. So probably a waste of time, but that might not stop them trying it.

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    CGT, IHT, and VAT will all increase with the Marxist in a suit, Sir Kneeler.

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    Always do under labour

     
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    I'm selling regardless... I've accepted that the game is over... It gets increasingly worse every month and my plan oisget out whilst I can... Take the hit with CGT. It isn't gong to get better. I've just had possession on a property granted that I've been trying to get back for almost 2 years (Scotland). I've now got to wait 60 days and hope they leave.... Enough is enough... I'm out! 3 down.... 8 to go!

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    When Blair was PM CGT was actually reduced. Very clever move as revenues for the government increased markedly. The incoming Labour government are ideologically against reducing it and as a result will collect less tax. I am expecting them to add any gains to income.

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    Capital gains tax is colossal for long term landlords with the removal of taper relief as said. Long term landlords are also older landlords so all this tax is on inflation not a capital gain when the value of your money is so little compared to when you bought with real money.
    Also can’t sell if you are older and pay 24% Capital Gains tax (the £12k relief is gone ) then pop your clogs your estate pays smother 40% but it not on the remnants but on the whole amount again so the Capital gains you paid is washed away, did you know that.

  • Richard LeFrak

    With CGT at the rates it is now and probably in future this will restrict landlords with exit strategies. No one in their right mind will sell to pay a chunk to the revenue to waste.

    I will hold until I clock off but I will refinance to get my money out. At the end my kids will own them and will be passed through to them over the next few years. If they reduced the CGT to a decent rate then no one would mind paying a bit and supply would be fluid, outright theft at these levels.

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    The bit they seem to forget is that for most landlords selling is a choice. The timing of a sale is flexible. If it makes financial sense we may sell, if it doesn't we won't. If we don't sell HMRC don't get any CGT. They also don't get any of the other property transaction related taxes such as SDLT and VAT. How much does government greed cost the economy by restricting transactions?

  • George Dawes

    All part of the long term plan

    Keir and rishi both paid up members of the wef following orders

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