The Finance Minister has reportedly ruled out a capital gains tax increase in this month’s Budget.
According to what was reported by Treasury Ministry sources The timesJohn Healey does not plan to increase the tax because he fears it would hurt economic growth.
The decision could save some landlords more than £15,600 in extra tax when selling an investment property, according to analysis by The Letting Partnership.
The company calculated that the average UK property value has risen by £74,442 over the past decade, from £198,169 in July 2016 to £272,611 in July this year.
Under the current rules, a higher or additional taxpayer who sells a property at that gain could face a CGT bill of £17,866 at the current rate of 24%, excluding allowances.
Had CGT instead been aligned with income tax rates, the bill for higher-rate taxpayers could have risen to £29,777 by 40%, an increase of £11,911.
For additional rate taxpayers, a 45% rate would have increased the bill to £33,499, adding £15,633.
The basic taxpayer would have seen liabilities rise from £13,400 at the current rate of 18% to £14,888 at 20%, an increase of £1,488.
Chris Mason, Chief Operating Officer at Letting Partnership, says: “The Chancellor’s decision not to seek a CGT increase will come as a welcome relief to landlords, particularly those who have seen the value of their investment properties increase significantly over the past decade.
“However, while this particular threat appears to have been taken off the table, the broader challenges facing the private rented sector remain.
“The government must recognize that it is the cumulative effect of these changes that threatens to undermine landlord confidence.”
Sarah Coles, head of personal finance at AJ Bell, says keeping the CGT rate unchanged is probably a sensible move from a tax revenue perspective.
“The August tax receipts numbers were a useful reminder that for this tax specifically, tightening the screw does not always raise more money for the public finances,” she says.
“In the months following the start of the new tax year, the Treasury received less CGT than the previous year.
“This suggests that the significant reductions in the annual exemption amount and rises in the stocks and shares rate did not boost taxes as the Treasury had hoped.
“People simply changed their behavior to get around the change – making gains before the change and then hoarding assets for as long as possible afterward, or simply deferring gains in the hope of waiting out higher taxes.”
