>Double Trouble CGT Proposals

The amount of tax levied on capital gains could be raised by billions of pounds, according to a new report. About £14bn could be raised by cutting exemptions and doubling rates, according to the review, which was commissioned by Chancellor Rishi Sunak.

The main losers would be wealthy people who own second homes or assets not shielded from tax. It comes as Chancellor Rishi Sunak looks for ways to cover the enormous costs of the coronavirus pandemic. In September, he reassured recently-elected Tory MPs there would not be a "horror show of tax rises with no end in sight".

The Office for Tax Simplification (OTS), however, found that many current features of capital gains tax "can distort behaviour" as people try to lower their bills. The government-run body which provides independent tax advice says the tax, levied at 10% for basic-rate taxpayers and 20% for higher-rate taxpayers, could be doubled if it were brought in line with income tax.

CGT is the levy you pay on the profits - or gain - that you make when you sell, give away or dispose of something you own. For residential property, for example, it is charged at 18% or 28% for basic-rate taxpayers and higher-rate taxpayers respectively.

The report also suggests the amount raised could also be boosted by cutting exemptions. At the moment, the first £12,300 of capital gains is exempt. About 50,000 taxpayers reported profits under that threshold last year. The body said that the current rules were "counter-intuitive" and created "odd incentives".

"The disparity in rates between capital gains tax and income tax can distort business and family decision-making and creates an incentive for taxpayers to arrange their affairs in ways that effectively re-characterise income as capital gains," the report said.

Will The Government Double The Rate of CGT In Line With Income Tax?

Before dropping your jaw in horror - at the prospect - that the Office of Tax Simplification is suggesting CGT could be brought more in line with income tax - or doubled - pause for a second. Most of you reading this article are landlords who own at least one buy to let property- which is a wealth tax. There are roughly 265,000 who paid CGT in 2017/18 and from those there are 50,000 who didn't pay it... why I hear you ask because as highlighted above the first £12,300 on any profit is exempt. That leaves us with 215,000 tax payers who are landlords with a buy to let. And increasingly require more information about how they can shield their wealth in an ever changing world.

What Will Landlords Do if There is a CGT Rise?   

I suspect they have good accountants who will advice them of the best ways to protect their wealth!!

And rather than triggering a CGT charge by selling a buy to let. Landlords may instead choose to hold on to the property and put it in a trust for their children - as many landlords are doing. Alternatively, there could also be a rush to sell before higher CGT rates come in. It may even be the case that some landlords end up having a lower tax bill under new OTS taxation proposals, as all CGT made before 2000 would be tax free. And for some landlords it doesn't even register as important because they can't see themsleves selling up anytime soon. And no need to do anything until it's time to do it.. right? The problem with this approach is you leave things to chance so I appeal to those landlords to make sure they get professional sound advice it will pay-off in the long term. The motto here is "Prepare to plan or Plan to fail" because the way things are going when you zero in on selling a btl property it may not even be worth doing..

Mr Sunak commissioned the report in July, but does not have to accept its findings. A spokesperson for the Treasury said:

"The government's priority right now is supporting jobs and the economy. "We thank the OTS for their independent report which will be considered in due course."

I personally do not think that the government are going to go in "Guns Blazing" with immediate "CGT hikes" there will be a delay in repairing the public finances until the economy has fully recovered from the pandemic – expected to be 2023 at the earliest – to avoid the mistakes made following the 2008 financial crisis when George Osborne undermined the recovery by launching a decade-long austerity drive.

Landlords have time to prepare and get their house in order if you are thinking of selling up we can help you find the right buyers on our database who would be interested in adding to their buy to let portfolios in the Wandsworth and SW London area.

And for any buy to let landlords who would like to discuss further how we can help them manage their buy to let portfolios please get in touch. Maybe this is the time if you haven't already contacted us. Whether you use our agency, another agency or you manage your property yourself. The service is free of charge, we don’t need to meet face to face as we can do it over Zoom and it’s all without obligation. I promise to tell you what you need to hear – not what you want to hear … what do you have to lose?

For any landlords in Wandsworth & SW London area wanting to take this further please complete the form below and we will be in touch to arrange a call or a zoom meeting which ever you prefer. Here's the link:  https://letsfindahome.co.uk/contact-us