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Lawson Defends Cgt Hike

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Nigel Lawson on Radio 4 Now.

And he's a second-home owner. Good to hear it from someone with his background and history!

I'll defend it, from a point of view of having a six-figure equity portfolio and FTSE-beating capital gains. But mine isn't a voice to get heard on the meeja, especially if I'm not towing their line.

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He also said that Brown's changes to the tax system were responsible for the bubble in house prices and that high house prices were one of the reasons we got in the economic mess. (High house prices were IMO a symptom of the massive amount of money in the system, rather than a cause, but I'll let that pass).

My thoughts are that the problem with the CGT proposals is not the alignment of gains to marginal tax rates, but the lack of any allowance for inflation. If inflation does hit us then we are going to be in some almighty trouble as losses get taxed as gains, and this will cut investment.

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Anybody see CH4 news last night, where somebody opposed the CGT hike saying poor people who maybe have one or two houses in addition to their own....

Erm if you have 3 houses or you are dumb enough to over leverage yourself to get into the position where your name is on 3 deeds then you ain't poor!*

*but may soon be.

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He also said that Brown's changes to the tax system were responsible for the bubble in house prices and that high house prices were one of the reasons we got in the economic mess. (High house prices were IMO a symptom of the massive amount of money in the system, rather than a cause, but I'll let that pass).

If I recall correctly, he said the CGT change contributed to the rise of BTL.

House price inflation is indeed largely a symptom of loose monetary policy due to the mad managerialist fashion for "inflation targetting".

My thoughts are that the problem with the CGT proposals is not the alignment of gains to marginal tax rates, but the lack of any allowance for inflation. If inflation does hit us then we are going to be in some almighty trouble as losses get taxed as gains, and this will cut investment.

If people have borrowed money to buy assets then they have helped increase the money supply which causes inflation. Any allowance for inflation should only be applied to assets bought with cash. Savers don't get an allowance for inflation when paying tax on thier interest.

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I think the drop in CGT to a flat 18% was an awful and quite incredible decision for a tax-raising government.

Firstly it was too low - it allowed people to make huge unearned gains off of property speculation. Entrepreneurs already had a low tax rate on the sale of businesses and the £9000 annual allowance was enough for most with large share portfolios to be able to be able to manage their gains.

Secondly, it was a tax on inflation. There was scope for indexation or taper relief, so the higher the government allowed inflation to grow, the higher its tax revenue; totally unjust.

The two combined made it perfect for fuelling a short-term property bubble. Why the government thought it was so good to reward the windfall gains of BTL speculators is beyond me.

This is quite good news for stockbrokers, however. For years we have been selling products to investors to dress up their income as capital gains. Now we can look forward to selling them a whole new range of products, making a tidy commission.

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He also said that Brown's changes to the tax system were responsible for the bubble in house prices and that high house prices were one of the reasons we got in the economic mess. (High house prices were IMO a symptom of the massive amount of money in the system, rather than a cause, but I'll let that pass).

Lawson is imo more right than you are. The high and fast rising house prices were in large part the actual cause of all the lose money and changes to tax status of real estate and real estate gains (not just capital gains) were a large part of what encouragaged speculation in houses and caused the rises to be large and fast when the economy started growing

Edited by Stars

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This is quite good news for stockbrokers, however. For years we have been selling products to investors to dress up their income as capital gains. Now we can look forward to selling them a whole new range of products, making a tidy commission.

You a stockbroker?

I'd love to learn of any products you have that could convert PAYE income to a capital gain, despite the tax changes. And indeed, the new breed of products you now envisage. I'll take a view on your commission once I've seen the product, but the £40k I've put into VCTs over the past two years should tell you something!

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He also said that Brown's changes to the tax system were responsible for the bubble in house prices and that high house prices were one of the reasons we got in the economic mess...

"Brown's changes to the tax system" were a contributory factor but HPI obviously was global. The global changes to lending practices [permitted by a global failure in financial regulation] are the real culprit.

Pleasing to hear someone say that "high house prices were one of the reasons we got in the economic mess".

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"Brown's changes to the tax system" were a contributory factor but HPI obviously was global.

The downturn was global, not the huge house price boom, although it happened in many places. The tax treatement of real estate in many places has similarities. It is notable that places with higher taxes on real estate tended to get away with smaller house price booms (for obvious and inarguable reasons).

Edited by Stars

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You a stockbroker?

I'd love to learn of any products you have that could convert PAYE income to a capital gain, despite the tax changes.

If you can run you employment as a Ltd Company, it is a trivial thing to do.

You "buy" a limited company for one pound. "Employer" payments for work done go into the limited each month. You don't draw a monthly salary instead leaving the funds that represent your remuneration inside the company wrapper. At the end of a couple of years you liquidate the company taking the accrued funds as a capital gain from your original one pound investment.

Of course you do have to have enough savings to survive without a salary for a couple of years, but I know of people who do this.

tim

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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