Wednesday, December 4, 2013

Capital gains tax on overseas buyers

Middle class threatened by tax squeeze

This could be it folks. If they manage to close loop holes at the same time. If this is carried through there will be capital gains tax on overseas owners of Uk propertes. What we need is for them to announce it as taking place sometime in the future which give all the wealthy expats and overseas buyers time to offload their properties on the market, thus starting the cycle of excess supply and putting downward pressure on the market.

Posted by britishblue @ 09:01 AM (2682 views)
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10 thoughts on “Capital gains tax on overseas buyers

  • Wasn’t it excess credit that causes high house prices and not supply 😉

    If not then why were house prices high in Ireland and USA in 2007 when there were plenty of houses.

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  • K @! Excess credit is one factor, but the herd mentality is another factor. There is a herd mentality in London at the moment. I see it every day as i own a removal company. This is driven by people thinking they are going to miss out and making stupid decisions. Some people who have been holding out for years for a crash are now buying in the suberbs. But central London prices have started to cool as they have been inflated beond belief. If you are an overseas buyer with huge gains and looking at a tax that is coming in a few months down the road, knowing the market has cooled, you may just be tempted to offload at a slightly cheaper price. If this starts the ball rolling and the mood changes to one of house prices having peaked then the cycle might start reversing.

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  • Mark Wadsworth says:

    Squeal piggies, squeal, is all I can say…

    “However, the plan would also apply to British people living abroad and who are classed as non-resident here, but who still own property in the UK. Approximately five million Britons live abroad.

    Jeremy Cape, tax partner at Denton, said: “It’s impossible to tell how many British citizens abroad will be affected by this possible change. Potentially the largest class will be those who retired a decade or so ago to a warmer climate, but held on to their UK homes.”

    OK, so there you are in a sunny Spain with an empty home in the UK you don’t need (or its rented out, so it’s a business asset) and you decide to sell it, you end up with a big pile of cash. That pile might be 28% smaller than it would have been without CGT, but so what? You are still better off in cash terms, how is that a “squeeze”?

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  • The media is doing their best to encourage the heard mentality, as it gives them a source of income from adverts etc.

    I can help feeling that the route cause of much of the housing speculation and bubble blowing is due to the decline in the real economy and it becoming more and more difficult to scrape a living. That’s is what is getting people to speculate in housing and other bubbles (stocks, bitcoin, bonds). If there was genuine productive growth in the economy (like Germany) then people would be participating in that rather than speculating on get rich quick schemes. I think that is partly why places like Ireland, Greece and Spain had some of the biggest bubbles as they have some fewest opportunities for real wealth acquisition through hard work.

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  • Khards @ 3. Couldn’t agree more. You ask anybody fortunate enough to have some savings and they’ll tell you that property is their investment of choice.
    This is why I think this measure, if applied, would have only partial results. The bubble is inflated from within.
    Is it sustainable? No. when will it burst? That’s the million dollar question.

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  • Mark, my understanding of CGT allowance is that the years allowance, (one year only), is applied in year of disposal. I read a newspaper article which implied that the various years allowances for the period of ownership were cumulative. Can you confirm?

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  • All part of the biggest wealth transfer in History. Coming soon.

    ..No, I don’t know the precise timing….

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  • mark wadsworth says:

    TRL, the annual exempt amount of £10k or so is clearly annual. Use it or lose it.

    But there are lots of other rules about a house that was your main home and you move elsewhere and leave it empty or rent it out, that does not mean that the main residence exemption is lost overnight, there is a fiddly time apportionment.

    Secondly, newspapers normally write complete nonsense about tax as they do not understand it and don’t want to, thirdly, I do not know what the new rules will be, perhaps they will have a cumulative “annual exempt amount” or something.

    Of course, LVT would sort all of this out much quicker and better, wouldn’t it?

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  • Thank you Mark, I suspected this. It was actually an article posted here from a mainstream newspaper. I am disgusted that journalists can get away with such incredible inaccuracy.

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  • BB – the flip side of that argument is that the herd collectively decide not to sell, removing any hope of their properties ever coming onto the market, keeping supply restricted so keeping prices high and guaranteeing them a decent rental income.

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