1 Comment »

RSS feed for comments on this post. TrackBack URI

1. The ‘full article’ linked above states incorrectly: “Is there any good news for buy-to-let? Yes, the good news for landlords is that despite missing out on entrepreneur’s relief they will still gain significantly from the tax changes. The flat 18% rate of tax replaces CGT on a sliding scale, coming down from 40% for higher rate taxpayers.
   Even with taper relief the minimum tax rate on residential property is 24% until the changes come in, so those who have held properties the longest will get a 6% tax cut and those who have held them for a shorter time an even bigger break.”

   This is not the case. CGT is not currently all charged at 40%. 40% tax rate is only payable on that portion of sums above ones £5,225 personal allowance + the £34,601 limit of the 20% band, whether from earned income or capital gain. So 40% CGT has only been payable on income over £39,826. Below that the rate is 20% or less.

   So to claim that BTL owners will be paying at least 6% less simply is not true. At present low earners would most likely pay only 20% CGT on most or all of the gain from selling a typical property before Mar 08. Especially likely where jointly owned. Effectively just 12% with taper relief if owned for 10 or more years. Thanks to the chancellor This will increase to 18% from Apr 08 onwards because although that’s 2% less than the standard 20% tax rate Darling is doing away with taper relief. Mr Darling’s changes in Apr 08 mean we will now have to pay for a gain that isn’t real because there will be no allowance for inflation.

   Comment by Robin Pearce — 18/2/2008 #

Leave a comment