Myth-busting – Electrical Safety installations Act 202011:19 AM, 3rd August 2020
About 2 weeks ago 82
Property investors will pay more inheritance tax and capital gains tax after the government changed the basis for calculating index-linked increases in reliefs.
The back-door move will increase the amount of tax collected on all transactions from April 2012 despite Chancellor George Osborne promising CGT rules would remain the same during the life of this Parliament.
To avoid the rise, taxpayers contemplating large disposals that will involve capital gains tax should consider completing transactions before the end of the tax year on April 5, 2012.
The extra money will come from switching the measure of inflation from the Retail Price Index (RPI) to the Consumer Price Index (CPI).
Inheritance Tax nil-rate bands (IHT) will stay at the current £325,000 until the end of the 2014-15 tax year and then increase at the same rate as annual CPI, rounded up to the nearest £1,000 unless Parliament agrees a contrary figure.
The CGT annual exemption stays at £10,600 until the end of the 2012-13 tax year, and then increases at the CPI rate.
The change brings index-linking for tax in line with that of benefits, which have already switched to CPI.
According to the Office of National Statistics, CPI is currently 5%, while RPI is 5.4% – applying these rates to the CGT annual exempt amount would increase the allowance by £530 to £11,130 under CPI or £573 to £11,172 under RPI.
Traditionally, RPI runs at a higher rate than CPI.
In another announcement, the government has also scrapped low stamp duty rates for offshore companies buying property in the UK.
Instead of paying 0.5%, offshore companies will now pay land duty stamp tax at 5%.
The move closes a loophole that lets wealthy property investors avoid paying stamp duty on buying homes.
HM Revenue & Customs is looking for 1,200 tax dodgers who have skipped paying around £35 million in stamp duty under the avoidance scheme.
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