CGT should be the same rate as income tax and reliefs abolished

by Property 118

11:00 AM, 11th September 2019
About 6 days ago

CGT should be the same rate as income tax and reliefs abolished

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CGT should be the same rate as income tax and reliefs abolished

The left wing think tank, Institute for Public Policy Research (IPPR) has released a study titled ‘Reforming the taxation of income from wealth and work‘ which recommends the taxation of wealth in the same way as income. The IPPR claim that income inequality in the UK is one of the highest in the world and it is essential to redistribute increasing property wealth for economic justice.

This is aiming an attack directly at landlords and does not take into account the overall social effects that are taking place with landlords selling rental homes due to increased regulation, taxation and institutional hostility.

The effects of this are already being seen with HMRC reporting an 18% increase in Capital Gains Tax (CGT) payments in the last financial year from £7.8bn to £9.2bn.

The IPPR want CGT on the sale of property to be charged at the same rate as income tax. However, this does not take into account the risk taken by property investors as opposed to earned income that is risk free. Currently CGT is already 10% higher for the sale of rental and second homes than for other forms of investments. There is also the issue of double taxation where a landlord has likely paid tax already on the money saved to buy an investment property and then is taxed again upon its sale in addition to tax on the rental income during the life of the investment.

In Addition the IPPR also plan to reduce the annual exemption allowance on CGT from £12,000 to only £1,000.

The IPPR summary for their proposals said:

“First, we propose that income from wealth should be taxed the same as income from work. Capital gains should be taxed at the same rates as income from employment, and the separate reliefs applied to capital gains tax (CGT) should be abolished.

“A similar policy was last implemented by Conservative chancellor Nigel Lawson. Capital gains tax rates are substantially lower than they were pre-2008, and are currently taxed at much lower rates than income from work. Lower tax rates for the wealthy than for ordinary earners are fundamentally unfair; they also distort economic behaviour and create opportunities for tax avoidance.

“We estimate that these changes could raise up to £120 billion of additional revenue over five years, falling to £90 billion when accounting for potential behavioural effects. Removing the exemption of capital gains upon death could raise up to an additional £25 billion over the same time period, falling to £15 billion with behavioural effects.

“There are inevitably large uncertainties around these estimates, but even if the behavioural effects were larger, or we introduce an indexation or rate of return allowance (RRA), we would still expect these changes to raise significant sums. Our proposal would substantially increase revenues, while making the tax system fairer.”



Comments

Ian Narbeth

15:57 PM, 11th September 2019
About 6 days ago

The link to the report is not working. I would take issue with the claim that income inequality in the UK is one of the highest in the world. See e.g.
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2172rank.html
and https://en.wikipedia.org/wiki/List_of_countries_by_income_equality

Neil Patterson

16:03 PM, 11th September 2019
About 6 days ago

Reply to the comment left by Ian Narbeth at 11/09/2019 - 15:57
Looks like their website is down!

Whiteskifreak Surrey

9:15 AM, 12th September 2019
About 5 days ago

I think this is that proverbial straw which will break camel's back.
Time to leave the sector.

Monty Bodkin

10:00 AM, 12th September 2019
About 5 days ago

It would result in landlords not selling in the hope that fair taxation is brought in.

Simon Williams

10:37 AM, 12th September 2019
About 5 days ago

The IPPR describe themselves as the UK's leading "progressive" think tank. "Progressive" means left leaning so no surprise they are anti-landlord and anti-wealth creation.

They have of course lied by omission. Although it was true that CGT and income tax rates were once the same, back in those days you had two crucial benefits. Firstly, taper relief meant that the longer you held property, the lower your CGT rate would be. This would reduce a 40% rate down to 24%. Second, you had indexation allowance designed to ensure you weren't taxed on purely inflationary gains. Now you ARE taxed on inflationary gains.

I also seem to recall Osborne toying with the idea of raising CGT (afterall, he hated us) and deciding that the 28% top rate was actually the optimal amount beyond which the tax take is likely to fall rather than increase. So he kept it at that.

Despite all this, I would say it is a near certainty that Labour would seek to increase CGT if it came to power. Even if the Treasury advised against.

Never has the outcome of a general election been so crucial to the future of landlords as the one which will soon be upon us.

terry sullivan

11:44 AM, 12th September 2019
About 5 days ago

another bunch of leftie boat brakes

Dennis Leverett

12:12 PM, 12th September 2019
About 5 days ago

They don't understand the reality of cause and effect, they are totally blinkered and should try to understand why Communism and it's aspirations have failed. They live in a world that no longer exists and never will. How many of the top lefties would willingly give up their fortunes they have stashed away?. Can't they see that the far right is growing rapidly in Europe and should ask themselves why.

terry sullivan

12:52 PM, 12th September 2019
About 5 days ago

there is no far right in most of europe

Whiteskifreak Surrey

13:07 PM, 12th September 2019
About 5 days ago

Reply to the comment left by terry sullivan at 12/09/2019 - 12:52
With all due respect - i am not sure if you are correct. The movements (certainly right-oriented, perhaps not far-right yet) react to the strong presence of lefties . I do not remember any time European countries were so divided internally: Britain leads that, but we also have Hungary, Poland, Italy and Ukraine. I hear that in other countries is not much better and the division is growing.
Personally I am very worried with what is happening in this country, and how we are divided and in danger of having a Marxists government, because the Right and Centre are governed by ERG&Co., without any consideration for a moderate, middle class citizen. I am not sure I that ready to carry on living here if everything I was working so hard for is going to be taken away from me either by Tory taxes, or by the worst ideology of Marxism and communism.

Dennis Leverett

14:21 PM, 12th September 2019
About 5 days ago

Reply to the comment left by Whiteskifreak Surrey at 12/09/2019 - 13:07My thinking exactly. Perhaps far right a bit strong but heading that way.


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