Capital Gains Tax to increase from 18% to 30%?

HammerSmashedFace

Capital Gains Tax on any property that isn't your first home should be 80% (as of course it's all about yield as Graham states:rolleyes:), it won't happen though, simple reason the self interested politicians want to continue feathering their own nest when they get booted out and the sell their second homes that, incidently the taxpayer will have been paying for whilst they are pretending to do a job for the country in the House of Commons.

Mr_Mumble

boomerangs wrote: »

Absurd? Capital Gains tax was 40% only a matter of months ago.

CGT was based on your marginal income tax rate, it was never 40%. This was not a technicality for higher rate taxpayers - it allowed most to retire, become basic rate taxpayers and pay at, most recently, 22%.

edit: probably need to clarify what I consider absurd about this. The tax man is effectively saying anyone who earns less than £43,875 per annum will be penalised for taking capital risk (paying 30% rather than 20% tax).

Thrugelmir

kennyboy66 wrote: »

This would be interesting. We have had roughly 30 years of private landlords being encouraged by the tax and legal system. A large part of this was necessary, but the balance has tipped too far, so that landlords are competing with 1st time buyers and the houses / flats we have built in the last 10 years have been to meet investor demand rather than housing demand.

Property until the late 90's was mainly the preserve of the capital rich.

As commercial property loans ( now referred to as BTL) were often 1% to 2% higher than normal SVR's. (Only 30,000 loans in existance in 1999). Making borrowing to buy not a particularly great investment on a smallscale.

The exception to this was property split into flats or student accomodation. Though the older houses which served this purpose in many cases have been demolished and replaced by block of purpose built flats.

Harry_Powell

kennyboy66 wrote: »

Surely some mistake. The biggest beneficiaries of the current Cap gains tax system are higher rate tax payers.
The current tax regime means that venture capitalists convert income which would be taxed at 40% (or higher) to capital gains at 18%

It would be difficult for normal taxpayers to manipulate capital gains to income but still manage to come in at a marginal tax rate of less than 30% even taking into account with the tax free annual allowance.

Taxes going up is rarely something to celebrate, but going up they are, and we are really just talking about the least worst methods of raising tax.

The thinking behind the CGT increase is that when the new 50% tax rate comes in for people who earn over (150K), many will get around it (I don't know how, but then I don't earn anywhere close to £150k!!) via cap gains. Raising CGT will therefore close a loophole before it even opens.

There is also talk of stopping higher rate pensions relief for people who earn over £100k (I believe it has already been withdrawn for people who earn over £150k?) and perhaps even removing it completely.

It seems that labour are going back to the 'common man' in order to get re-elected.

Thrugelmir

Harry_Powell wrote: »

The thinking behind the CGT increase is that when the new 50% tax rate comes in for people who earn over (150K), many will get around it (I don't know how, but then I don't earn anywhere close to £150k!!) via cap gains. Raising CGT will therefore close a loophole before it even opens.

There is also talk of stopping higher rate pensions relief for people who earn over £100k (I believe it has already been withdrawn for people who earn over £150k?) and perhaps even removing it completely.

It seems that labour are going back to the 'common man' in order to get re-elected.

Do you mean the image spin machine is in full flow again?

This is tinkering around the edges and still avoids the issue of where the main tax revenue (or cost cutting) is going to come from to balance the books.

StevieJ

Pennywise wrote: »

Capital gains tax increases are probably the most palatable tax rise for the electorate. I'd never really understood why Gordon Brown reduced them in the first place, but now it looks like yet another tax u-turn for him. (Did he never think anything through?).
?

I thought he put up the rates by removing indexation where many a business was only paying 10%, a classic piece of Houdini/Brownie magic I of course could have completely misunderstood but knowing it was Gordon, I don't think so

kennyboy66_2

Harry_Powell wrote: »

There is also talk of stopping higher rate pensions relief for people who earn over £100k (I believe it has already been withdrawn for people who earn over £150k?) and perhaps even removing it completely.

I don't believe they have finalised the details of the limiting over £150k earners to 20% yet (although its supposed to taper to 20% to £180k)

It comes in in April 2011 - although new rules applied from April 2009 to prevent people stuffing vast amounts into their pension before the change.

The question will then become, why bother putting money in a pension scheme at all if this affects you. Afterall, you are only deferring tax rather than potentially reducing it.

kennyboy66_2

StevieJ wrote: »

I thought he put up the rates by removing indexation where many a business was only paying 10%, a classic piece of Houdini/Brownie magic I of course could have completely misunderstood but knowing it was Gordon, I don't think so

Sort of.

Indexation relief (basically to allow for RPI) was abolished by Brown in 1998 and replaced with taper relief. Naturally Brown had to complicate this further by having different rules for different dates, but by 2002 (for disposals) if you had held a business asset for 2 whole years, the chargeable gain was only 25%.
Therefore a higher rate taxpayer would pay 40% of 25% ie 10% tax rate.

What made him think that holding business assets for 2 years was good for long term UK investment is beyond me. Instead it seems purely designed for Venture Capitalists to buy businesses, load them with offshore debt (so as not to pay Corporation tax, or tax on the debt interest as it was offshore) and re-sell them 2 years later, take no income and then pay 10% tax on their profit.

Like so many things - a complete pans.hite of a policy.

Harry_Powell

kennyboy66 wrote: »

I don't believe they have finalised the details of the limiting over £150k earners to 20% yet (although its supposed to taper to 20% to £180k)

It comes in in April 2011 - although new rules applied from April 2009 to prevent people stuffing vast amounts into their pension before the change.

The question will then become, why bother putting money in a pension scheme at all if this affects you. Afterall, you are only deferring tax rather than potentially reducing it.

Worse than that, people will be receiving 20% tax relief on monies paid into their pensions and being taxed at 40% when they eventually receive it. It doesn't seem fair.

kennyboy66_2

Harry_Powell wrote: »

Worse than that, people will be receiving 20% tax relief on monies paid into their pensions and being taxed at 40% when they eventually receive it. It doesn't seem fair.

True - but you would need a pot approaching £1m and I guess if you have that much you should be paying an accountant to tell you to stop paying into a pension anyway.