45% Capital Gains Tax Rise
With tax bills about to go through the roof, is this the time to leave the Nottingham buy to let property market?
Yet, like all things, the devil is in the detail as Nottingham 2nd homeowners and Nottingham landlords may well finish up having lower CGT tax bills with these new taxation proposals, even though the CGT restructurings are being introduced to raise the much-needed cash for the Government.
Apart from the suggested cut of the annual CGT allowance and increase in the CGT percentage rates, the OTS report also proposed reintroducing rebasing and indexation. In layman’s terms, the OTS are suggesting all gains made before 2000 would not be taxable (rebasing) and any capital gains would be calibrated to account for inflation.
So, what would that actually look like for a Nottingham landlord? Let us assume we have a Nottingham landlord who bought a Nottingham buy to let property in 2000.
Under the current CGT rules
- The average value of a Nottingham property in 2000 was £73,400
- Today, that same Nottingham property has increased in value to £226,900
- Meaning a profit of £153,500
- As our Nottingham landlord is a high-rate taxpayer (earning £60,000 a year), their CGT bill after the annual allowance would be £39,536
Under the new proposed CGT rules
Under the new proposals, the CGT payable (assuming the CGT rate of 40% and a lower annual allowance of £5,000), the same Nottingham landlord would only pay £31,203 – a saving of over £8,000.
And the savings don’t stop there. Remember, under the new OTS proposals, all capital gains made before 2000 would also be tax-free.
However, let us not forget the responsibility of the OTS is to report on tax simplification opportunities, not to set Government taxation policy. None of us have a crystal ball on what Rishi Sunak will do with CGT on buy to let property or second homes. Although, as time has always taught us with investments, often the worse thing to do is to make impulsive decisions on what MAY happen.
You must remember, CGT only gets charged when you sell or transfer your investments, and most people use their rental investments to provide their income. If you did sell up, the best 90-day building society accounts are obtaining 0.8% pa, the stock market is a rollercoaster (good luck with that) and Government 10-year bonds are paying a princely 0.324% pa … where else are you going to invest to get the income Nottingham property investments provide?
Property is an asset you can touch, feel, and ultimately understand. Maybe, this is the time (if you haven’t already) to take portfolio advice on your Nottingham buy to let investments? Many Nottingham landlords do so, whether they use our agency, another Nottingham 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?
