Wednesday, Oct 10, 2007
The media have got this totally wrong - CGT change is going to bring a glut of properties to the market
Mail: Second home and buy-to-let tax gift
"But tax experts said it had inadvertently handed a major tax break to second home owners and will save them thousands of pounds when they sell." NOT A CHANCE! Home owners who are liable of a very small CGT today (10% or less b'se of taper relief) vastly outnumber the BTLers who are on 40% rate. The former will want offload properties before moving to 18% CGT, i.e. before April. Funny how the media were calling BTLrs "long-term" investors. Now all that has evaporated!!! Ah ah aha hahh ahh ahh ah ahh. Imagine the i@iotic BTLer knowing he will have to hand 18% of capital gains back to Treasury, and subsidizing the tenant at the same time!! Thank you Alistar! Thank you for copying ideas from the tories including the unintended consequences. ah ah ah ah
11 Comments
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1. sold 2 rent 1 said...
It is a speculator's budget.
It will make BTL investments more volatile; when prices go up they will go up faster, and when prices go down they will go down faster too.
2. Music Man said...
I guess it goes both ways.
But put yourself in the position of a BTL profiteer over the last 10 years. Huge, unbelievable profits and now a time for change with an out option. HPC is in the news and they can save on CGT.
They're gonna get out.
Bonus for the site... lol
3. This comment has been removed as it was found to be in breach of our Blog Policies.
4. Conan said...
I'm not sure which planet the commentary above came from. Homeowners don't pay CGT (at 10% or any other rate) and handing 18% of the capital gain from the disposal of BtL property is a gift compared to the current 24% even at maximum taper relief after 10 years.
The editorial is totally misinformed and confused. 10% is the current business rate, and has nothing to do with the PPR of a homeowner, which is exempt CGT on disposal, and nothing to do with taper relief on additional properties, which generally reduces liability from 40% taxation down to 24% after 10 years.
How can someone so ignorant of the absolute basics presume to pass comment on such an issue? Just who is idiotic...?
5. Mr_sensible said...
" ... Home owners who are liable of a very small CGT today (10% or less b'se of taper relief) ..."
I don't think this is true: taper relief is only available on 'business' gains - people who privately own a second home currently pay 40% CGT when they sell, irrespective of how long they've owned it.
6. Sds said...
Mr sensible
I believe you are mistaken; you are not sensible at all
Mr Conan is correct in saying: "The editorial is totally misinformed and confused. 10% is the current business rate, and has nothing to do with the PPR of a homeowner, which is exempt CGT on disposal, and nothing to do with taper relief on additional properties, which generally reduces liability from 40% taxation down to 24% after 10 years."
7. Ben said...
Conan, I totally agree... the commentary is totally wrong! The vast majority of BTL's buy and sell as an individual and so are subject to personal CGT rates, not business CGT rates!
This is a massive cut in CGT tax for BTLers!
8. crash bandicoot said...
A lot of BTL'ers aren't "speculators" in that they do no research and are not sophisticated in their strategy. They are following their one instict that houses only go up in price, and up until now history has shown them to be correct. How they will react in the future is anyones guess because none have them have even factored in the possibility of a drop in prices. Expect the bankruptcy courts to be making the decision to sell for them.
9. Filbster said...
Confused
I disagree with your analysis to an extent. I do not expect that institututional investors who weren't going to sell prior to this announcement will suddenly be charging down to their local estate agents to sell their properties, for starters they will have had to have held their properties for ten years to qualify for 10% taper relief and if this is the case then they will be not only sitting on a potentially large profit but also probably a very good yield from their sitting tenant. I doubt that an 8% tax saving will be enough to persuade this investor to sell a property that brings in a steady income stream unless they were already planning to do so within the next two years in which case they may well choose to bring this forward. Nevertheless I expect the impact to be marginal.
Conversely an amateur buy to letter sitting on a large capital gain on paper would be foolish to sell now as opposed to after April 2008 as they would be giving up 22% of their profit in tax (assuming their profits breach their non taxable allowance). For them to sell now they would have to believe that the value of the property would fall by 22% to make it worthwhile and I doubt even people on ths website believe property values will fall that much by April 2008.
My own reading of the situation is that the amateurs will see a stagnating or falling market but will decide to hold on until April 2008 to make the sale in order to maximise profits, don't forget that they will probably have an over inflated opinion of their house value and therefore the profits they expect to make so they will be seeing a large tax saving on their calculators. Therefore expect in April to see a glut of properties hitting the market from buy to letters cashing in their asset, obviously this creates a downwards impact on prices and certain investors may find that they make a loss although in London where I live, anyone who bought over a year ago will probably still do pretty well.
Conan - the article does say that CGT is not payable on homes that people actually live in so i'm not sure what your criticism relates to.
10. Sds said...
mr sensible: you are wrong
11. Mr_sensible said...
Yes Sds, you already said that before. I know I got it wrong, no need to go on about it.