Emergency Budget: Capital Gains Tax to rise

TM1976

Hotscot wrote: »

Oh dear! This is such an emotive subject but cool heads are required or we'll end up slagging everyone. :mad:

Actually I find it pretty difficult to get excited about CGT but I do take exception to being called patronising when I'm just refering to the facts.

Hotscot wrote: »

In this case, that means around £20K of additional tax or a total of over £40K on a sale price of around £270K. Remember, this was a very long term holiday home/retirement plan. If my friend wished to move to a similar house in the same area, after CGT and other expenses (stamp duty, legal, estate agents, moving), I reckon she'd need around £49K from other resources just to purchase a house at exactly the same price as the one she was selling. That's around 18% (oddly enough) of the value of her home. Is she likely to move? Only if she has to from necessity. For someone who is almost 70, it's a tough obstacle.

Her selling and buying expenses are deductable for CGT purposes when calculating a gain. Her main home is sheltered from CGT under PPR so she only has a gain because this is a second home, on that basis I'm not sure why she needs to replace this home with another one? £40k is a lot of tax to pay in one go but she has made a gain of £142k out of which to pay it - does it look a lot because the rate is high or because she pays it all in one go? Over 25 years it's £1,200 a year and she doesn't have to pay it until the gain is realised.

Hotscot wrote: »

By linking the higher rate of CGT to income + capital gains for the first time, almost anyone who has owned a home for more than, say, 15 - 20 years will become a higher rate candidate... for one year only!

This isn't correct though because income tax and capital gains tax were linked in this way in 2007-08 and for previous years, in these cases the gain would have been taxed at 40% or could now be taxed at 50%.

I do agree that inflation should be considered, taper relief was quite generous, I think the indexation allowance was the fairest way to recognise this.

uk1

TM1976 wrote: »

Actually I find it pretty difficult to get excited about CGT but I do take exception to being called patronising when I'm just refering to the facts.

Oooooooh:(

Well .... I have no intention or need to sell any property I own. So I have no personal immediate concern about CGT rates. What I have made clear repeatedly is I object to the deception. I'm fed up with politicians cheating.

Your post accused me and others of greed or stupidity because you are unable to accept the possibility that a motive might be as I explained - rather than personal gain. The assertion of both greed, or stupidity or being dissatisfied with what one has is patronising and rather insulting and I like you took exception.:p

Hotscot

Actually I find it pretty difficult to get excited about CGT but I do take exception to being called patronising when I'm just refering to the facts

One of the key rules here is: "Please be nice to all MoneySavers. That’s the forum motto."

Her selling and buying expenses are deductable for CGT purposes when calculating a gain. Her main home is sheltered from CGT under PPR so she only has a gain because this is a second home, on that basis I'm not sure why she needs to replace this home with another one? £40k is a lot of tax to pay in one go but she has made a gain of £142k out of which to pay it - does it look a lot because the rate is high or because she pays it all in one go? Over 25 years it's £1,200 a year and she doesn't have to pay it until the gain is realised.

Older folk have many reasons for wanting two homes if they can afford it. One that is very common is that their families move but lifelong friends and asssociations do not. So retaining the main home in one place and having a second elsewhere (or vice versa)
can make a lot of sense. The point about the amount of tax payable is that in the kind of situation described, there is no easy way of part disposing year by year. So the system favours short-termism and penalises long-termism. That's not usually considered to be good economics in a stable society.

This isn't correct though because income tax and capital gains tax were linked in this way in 2007-08 and for previous years, in these cases the gain would have been taxed at 40% or could now be taxed at 50%.

Your information (and memory) may be better than mine but my "tax expert" says I am correct. Perhaps a suitably qualified tax accountant reading this could quote chapter & verse as I'll be away for a day or two and might not manage to investigate further.

I do agree that inflation should be considered, taper relief was quite generous, I think the indexation allowance was the fairest way to recognise this.

I'm glad we agree on this because really all else follows from it! Many thanks for reponding so fully. Cheers.

TM1976

uk1 wrote: »

Oooooooh:(

Well .... I have no intention or need to sell any property I own. So I have no personal immediate concern about CGT rates. What I have made clear repeatedly is I object to the deception. I'm fed up with politicians cheating.

Your post accused me and others of greed or stupidity because you are unable to accept the possibility that a motive might be as I explained - rather than personal gain. The assertion of both greed, or stupidity or being dissatisfied with what one has is patronising and rather insulting and I like you took exception.:p

I'm sorry if any offense was taken as none was intended or (I thought) implied.

I don't think there really was a deception here, in fact I think CGT got off lightly considering some of the things that were proposed - a £2,500 annual exemption and full harmonisation with 20/40/50% rates.

As for personal gain - surely this was your intention when you bought an investment property - I'm not criticising you for this, well done. As you don't intend to sell your property then it doesn't appear to be a problem for you anyway, the best way to avoid this if you wanted to would be to sell your PPR and move into your investment property.

TM1976

Hotscot wrote: »

Your information (and memory) may be better than mine but my "tax expert" says I am correct. Perhaps a suitably qualified tax accountant reading this could quote chapter & verse as I'll be away for a day or two and might not manage to investigate further.

Thanks. This really was the point I was trying to make the 18% rate was a bit of blip in CGT rates.

I wouldn't endorse Wikipedia as a source of tax info but here is what it says: http://en.wikipedia.org/wiki/Capital_gains_tax

I am a qualified accountant and to be honest I'm a bit out of touch with CGT but this is how it was when I did my professional exams.

As for your friend as noted to uk1 she could avoid this tax by taking her holiday home as her permanent home and selling her current PPR.

uk1

TM1976 wrote: »

I don't think there really was a deception here

We've done this to a turn. They said lower and middle income tax payers would continue to pay 18% tax. They knew this was untrue. They could have said people that have held second homes for a longer period would probably pay tax at 28%. This would have been true.

TM1976 wrote: »

As for personal gain - surely this was your intention when you bought an investment property.

This is one of the problems with presumption.

Who said I bought an investment property? I bought a house on a beach on impulse because we were working hard and wanted somewhere to relax. I still use it - I'm there now. I don't need to sell it and have no intention of doing so.

TM1976

uk1 wrote: »

This is one of the problems with presumption.

Who said I bought an investment property? I bought a house on a beach on impulse because we were working hard and wanted somewhere to relax. I still use it - I'm there now. I don't need to sell it and have no intention of doing so.

You didn't buy it to make a profit - but you have and you have to pay some tax if you sell it. But you aren't selling it - and have no intention of doing so - No problem then - you complained you were personally impacted - apparently you aren't.

As I said before glass half empty/half full. Retirement's going to be tough for you with your beach house that you don't need to sell.

uk1

TM1976 wrote: »

you complained you were personally impacted - apparently you aren't.

When? Please point.

TM1976

uk1 wrote: »

Let's see if I can help. How much of an issue is this for you personally - or are you just commenting unsympathetically on other peoples justifiable concerns?

With respect it is very easy to be patronising about other peoples' concerns when your own cash life plans aren't involved.

It's what I understood.

TM1976

uk1 wrote: »

Let's see if I can help. How much of an issue is this for you personally - or are you just commenting unsympathetically on other peoples justifiable concerns?

Would I be correct in saying that you are not within spitting distance of retiring having held a second home for a long period of time in preperation for your reitrement having been shafted by Brown, Equitable Life and your employers pension scheme going South? People are upset because they had heard in the budget that they would continue to pay cgt at 18% only to discover they had been deceived and would pay all or some at 28%. Can you not understand why they might be a bit huffy at being cheated yet again? Most of this group have had limited or no gains on the capital value of their second property for several years and they've now seen that situation worsened by yet another deceitful plunder.

With respect it is very easy to be patronising about other peoples' concerns when your own cash life plans aren't involved.

May as well quote the whole lot - sounded personal to me - sorry for any misunderstanding.