Law firm Moore Blatch has come under fire for suggesting investors could be worse off if they sell their property ahead of the proposed hike in Capital Gains Tax.
The new government has mooted plans to increase CGT from 18% to 40% or 50%. Yet Moore Blatch says many investors would be worse off if they sold their property now rather than in a year’s time, even with the increase in tax.
It bases its assumptions on Land Registry data showing prices have risen 7.5% over the past year.
For example, a property sold now for £200,000 with a capital gain of £50,000 would be liable for £7,182 CGT.
But if property prices rose a further 7.5% over the next 12 months, it would be worth £215,000 and the gain would be £65,000 liable for £21,960 of CGT. The net worth of the property would be £193,040 compared with £192,818 previously.
David Charlesworth, head of wealth management at Moore Blatch, says: “We would advise against making hasty decis-ions with regard to any CGT rises as capital appreciation is likely to outweigh any increased tax liability.”
But a spokesman for the British Property Federation says: “You can’t assume prices will continue to rise at the rate they did last year. The housing market is still unstable and prices will always depend on what the property is and where, and how much was paid for it in the first place.”