editor posted on July 08, 2010 01:21
Before the emergency budget on Tuesday 22nd June there had been much speculation that the Government would raise rates of Capital Gains Tax (CGT) in line with income tax and potentially create a huge disincentive for buy to let and other landlords. There was also a concern that any increase in CGT that had a delayed implementation may result in a significant number of properties being placed on the market for sale by investors seeking to dispose of their assets ahead of an increased tax rate.
In reality, whilst the Budget did introduce higher rates of CGT, these were not as punitive as had been trailled and they also came into effect from midnight on the 22nd June, giving investors no opportunity to try and avoid the higher rates anyway.
We do not anticipate that the changes in CGT will have any significant effect on the private rental sector.
The Treasury’s Budget 2010 document says:
As set out in the Coalition Agreement, to partly fund the increase to the personal allowance, increase fairness and reduce tax avoidance the Government will reform capital gains tax to align it more closely with income tax rates.
Effective from 23 June 2010, capital gains tax will rise from 18 to 28 per cent for those with total income and taxable gains above the higher rate threshold. This strikes the right balance between fairness and international competitiveness. A substantial part of the revenue from this measure comes from higher income tax receipts as the incentive to convert income into capital gains is reduced.
Basic rate taxpayers will continue to pay an 18 per cent rate on their gains. The 10 per cent capital gains tax rate for entrepreneurial business activities will be extended from the first £2 million to the first £5 million of qualifying gains made over a lifetime. The Government confirms that the annual exempt amount
for capital gains tax will continue to rise in line with inflation and will remain at £10,100 for 2010-11.