Chancellor Rachel Reeves rules out CGT hike for buy-to-let properties in Budget?

Chancellor Rachel Reeves rules out CGT hike for buy-to-let properties in Budget?

10:16 AM, 18th October 2024, About 2 weeks ago 9

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Chancellor Rachel Reeves WILL NOT change the rate of capital gains tax on the sale of buy-to-let properties in the Budget, sources tell The Times.

According to the paper, the Treasury is concerned that increasing the rate could cost money and damage the property market.

The former Chancellor Jeremy Hunt cut the top rate of capital gains tax for property from 28% to 24%.

Pure hyperbole

According to The Times, Ms Reeves is likely to increase the current 20% tax rate applied to share sales and could extend this to other assets, while some reliefs in the existing system are expected to be eliminated.

A government source told the newspaper that the changes are anticipated to raise revenue in the “low billions.”

However, The Institute for Public Policy Research (IPPR) argues there is a strong case for raising capital gains tax on residential property to align it with income tax rates of 20%, 40%, and 45%.

Pranesh Narayanan, research fellow at IPPR, said: “The recent fearmongering from some that increasing capital gains tax will take the economy back to the stone ages is pure hyperbole. It was famously pro-growth Conservative chancellor Nigel Lawson who equalised capital gains tax with income tax rates in the first place.

“We have spoken to multiple millionaires in the last few weeks who have made it clear that equalising capital gains tax with income tax would make absolutely no difference to their investment or entrepreneurial pursuits.”

Mr Narayanan adds: “The current system unfairly rewards those who already own assets over those who contribute productively to the economy through work.

These people have no clue

Mick Roberts, one of Nottingham’s largest landlords for housing benefit tenants, labelled such arguments as “nonsense.”

He tells Property118: “These people have no clue. Those influencing the government are once again contributing to increased homelessness. How do they think these assets came about in the first place? Some of them lose money in the early years.

“As for productivity—didn’t they realize we pay thousands in VAT every year? His approach is only pushing more landlords to sell, leading to even more homelessness.”

Increases in inheritance tax

This follows a BBC report suggesting that inheritance tax increases are expected in the Budget.

However, it remains unclear how many people will be affected or how much more they would have to pay.

When asked by the Treasury about the reports of capital gains tax and inheritance tax a spokesman for the Treasury told the BBC: “We do not comment on speculation around tax changes outside of fiscal events.”


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JohnSnow

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10:40 AM, 18th October 2024, About 2 weeks ago

No CGT increase on BTL property? Forgive me for being skeptical but I’ll believe it when I see it.

Cause For Concern

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11:12 AM, 18th October 2024, About 2 weeks ago

Reply to the comment left by JohnSnow at 18/10/2024 - 10:40
“You know nothing, John Snow” but I do agree with the sentiment.

Monty Bodkin

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11:35 AM, 18th October 2024, About 2 weeks ago

"It was famously pro-growth Conservative chancellor Nigel Lawson who equalised capital gains tax with income tax rates"

He also rebased costs of all assets along with indexation relief.

I suggest Pranesh Narayanan reads the full context of chancellor Lawson's speech rather than cherry picking "facts" in isolation;

"Lastly, capital gains tax. Strictly speaking, this should not be a tax on the original capital at all. Nor is it, so far as gains which have arisen since 1982 are concerned, thanks to the indexation provisions introduced by my predecessor in 1982 and extended in my 1985 Budget. But for gains that arose before 1982 the tax falls largely on purely paper profits resulting from the rampant inflation of the 1970s. In other words, it bites deeply, and capriciously, into the capital itself.

This has long been recognised as manifestly unjust. Indeed, from the time I first entered the House I have argued that capital gains tax should fall only on real gains and not on paper gains. I have therefore looked hard to see if the indexation provisions could be applied right back to the inception of the tax in 1965. Unfortunately, they cannot. The necessary information is in many cases no longer available.

Accordingly, I have decided to bring the base date for the tax forward from 1965 to 1982. That is to say, for all disposals on or after 6 April, that part of any capital gain which arose before April 1982 will be exempt from tax altogether for individuals and companies alike.

This Budget thus ends once and for all the injustice of taxing purely inflationary gains."

-Something most landlords and entrepreneurs would wholeheartedly agree with.

Kevin Allen

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12:54 PM, 18th October 2024, About 2 weeks ago

"Chancellor Rachel Reeves WILL NOT change the rate of capital gains tax on the sale of buy-to-let properties in the Budget ... "

For now maybe but it is coming. National Insurance on rental income as well.

Keith Wellburn

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13:24 PM, 18th October 2024, About 2 weeks ago

Unbelievable someone who has researcher in their job description can make such a fool of themselves and believe Lawson’s equalisation as it was done in the 1980s is equivalent to just aligning CGT with income tax rates today with no other adjustments.

Many landlords are old enough to remember the 1980s as adults, if these lefty millionaires think they are too rich they can always set up a charity. My set up capital as a landlord in 1990 came from the sale of a trading business on which I had to pay a chunk of CGT (no rollover relief available to invest in residential) and that business was funded by hard graft in a factory which was of course subject to income tax.

Putting the top slice of any gain into 45% tax for property owned for decades (which is likely to happen often despite the individual never earning enough year by year to be anyway near that income tax band) is surely just the opposite of any sensible policy to encourage long term property ownership for the open ended tenancies the Renters Reform bill is bringing in.

Don’t these think tanks and business owners recognise that a healthy rental market is an essential for mobility of labour and supporting the entrepreneurship necessary for economic growth. Even employees who would normally own their homes often rent initially when moving for a job opportunity.

JohnSnow

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14:46 PM, 18th October 2024, About 2 weeks ago

Reply to the comment left by Cause For Concern at 18/10/2024 - 11:12
“You know nothing"

> That makes two of us

Ed Tuff

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16:13 PM, 18th October 2024, About 2 weeks ago

Hope this is true!

Mark Alexander - Founder of Property118

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18:15 PM, 18th October 2024, About 2 weeks ago

They need to bring back CGT indexation allowances and taper relief.

Indexation Allowance and Taper Relief were regarded as fair because they aligned the taxation of capital gains with principles of equity, particularly by ensuring that only real economic gains were taxed and by encouraging long-term investment. Here’s why they were seen as fair:

Indexation Allowance:

Protection from inflation: Indexation adjusted the base cost of an asset in line with inflation, meaning that taxpayers would not be taxed on “paper gains” that arose purely from inflation. This was seen as equitable because it ensured that CGT applied only to actual increases in the asset’s real value, not the inflationary increase.

Neutrality: By factoring in inflation, the allowance helped maintain fairness across different economic periods, ensuring that individuals and businesses did not suffer from high taxes in periods of rising inflation, where asset values increased only in nominal terms.

Taper Relief

Encouragement of long-term investment: Taper Relief incentivised holding assets for longer periods by reducing the taxable gain based on how long the asset had been held. This was seen as fair because it rewarded patient, long-term investors who contributed to economic stability, as opposed to those making short-term speculative gains.

Progressive reduction in tax burden: The tapering effect meant that, over time, individuals could expect a lower CGT rate on their gains, which was particularly appealing for entrepreneurs and business owners looking to grow assets over the long term. The longer the asset was held, the more tax-efficient it became, which was viewed as fair to those who made lasting investments.

Overall, these reliefs were seen as reflecting economic reality and promoting investment behaviour that was considered beneficial for the wider economy, while avoiding taxing gains that were merely nominal due to inflation or short-term price movements.

PAUL BARTLETT

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22:59 PM, 20th October 2024, About 2 weeks ago

It's hardly that government has no responsibility for inflation since their monetary policy committee meets three weekly while landlords must take the long view being able to increase revenue just once per year.
That's a massive risk which is fully capable of destroying any trading surplus meaning that asset appreciation is all that remains. A double whammy of inflation impact, without indexation.

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