EMERGENCY BUDGET: CGT to rise to 28%
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George Osborne, chancellor of the exchequer has announced in the emergency budget today that from midnight, higher-rate taxpayers will pay 28% on their capital gains.
The 10% capital gains tax rate for entrepreneurs - which currently applies to the first £2m in qualifying gains - will be extended to the first £5m.
Low and middle rate income savers will continue to pay CGT at 18%.
Stuart Law, chief executive of Assetz, says: “Osborne’s Capital Gains Tax increase to 28% remains lower than the rates we had three years ago, of up to 40%, before Labour introduced the 18% rate. This move is not likely to have a negative impact on the UK property market as speculative investors are unlikely to sell off their buy to let property once this new tax rate is introduced at midnight tonight.
“Professional property investors are generally looking at the long-term benefits and see the importance of the regular income rather than short term capital gains.”
David Brown, commercial director of LSL Property Services, says: “A quarter of property investors will reconsider further investment in the private rented sector as a result of the CGT hike, even though the increase is more modest than some feared. With no more public money available to provide homes for the UK’s growing population, buy to let is the only way to provide homes to those unwilling or unable to buy their own home.
“The government should be encouraging the growth of the sector. The differential rate of capital gains tax according to income is likely to spur investors to find ways to transfer assets, for example to a lower earning spouse, in order to minimise any potential bill on disposals.
“On the positive side, a more balanced CGT regime will deter speculative property investment. Experienced landlords know they need a good yield to sustain their investment portfolio - they look to balance income and capital growth. This move should help reinforce the importance of that approach.”
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