Budget: Capital gains tax rise lets buy-to-let landlords off hook

StevieJ

Looks like the landlords will be happy.

Many buy-to-let landlords and second homeowners will be breathing a sigh of relief after the much-trailed increase in capital gains tax (CGT) proved more modest than some had feared. However, affordable housing campaigners accused the new chancellor of "bottling it".

http://www.guardian.co.uk/uk/2010/jun/22/capital-gains-tax-rise-buy-to-let

Pete111

+ in terms of overall house prices, there will be no rush to sell off property (and thus spiking supply) as the CGT increase is immediate

I'll happily take that!

Euphoria1z

any chance if someone can give me an example of how the new changes will affect someone selling a 2nd property? i u nderstand for low earners its still 18%? say if i earn 25K (is this classed as a low earner?) and sell a 2nd property for 50% more than i bought it, will the extra 50% be taxed at 18%? (do you take off 10k which is the relief/or exeption part?)

Thanks

IveSeenTheLight

Euphoria1z wrote: »

any chance if someone can give me an example of how the new changes will affect someone selling a 2nd property? i u nderstand for low earners its still 18%? say if i earn 25K (is this classed as a low earner?) and sell a 2nd property for 50% more than i bought it, will the extra 50% be taxed at 18%? (do you take off 10k which is the relief/or exeption part?)

Thanks

It's relatively simple.

(selling price - buying price - allowance) * CGT percentage.

Note that the allowance could be joint if the property is jointly owned

so in your example where you earn £25k (Do you earn on your second property too?), your CGT would be as an example

(£160,000 - £ 80,000 - £10,100 ) * 0.28
(selling price - buying price - allowance) * CGT percentage.

= £19,572 CGT and a profit of £60,428 above your buy price of £80,000

lvader

IveSeenTheLight wrote: »

It's relatively simple.

(selling price - buying price - allowance) * CGT percentage.

Note that the allowance could be joint if the property is jointly owned

so in your example where you earn £25k (Do you earn on your second property too?), your CGT would be as an example

(£160,000 - £ 80,000 - £10,100 ) * 0.28
(selling price - buying price - allowance) * CGT percentage.

= £19,572 CGT and a profit of £60,428 above your buy price of £80,000

CGT is only 18% for someone earning £25K

dealsearcher

IveSeenTheLight wrote: »

It's relatively simple.

(selling price - buying price - allowance) * CGT percentage.

Note that the allowance could be joint if the property is jointly owned

so in your example where you earn £25k (Do you earn on your second property too?), your CGT would be as an example

(£160,000 - £ 80,000 - £10,100 ) * 0.28
(selling price - buying price - allowance) * CGT percentage.

= £19,572 CGT and a profit of £60,428 above your buy price of £80,000

It certainly is not that simple.

It's still 18% up to £37,400, after (as I understand it) deduction of losses, income tax allowance and CGT allowance. The 28% tax only kicks in after £37,400 when all losses and allowances have been taken into account.

http://www.ifaonline.co.uk/ifaonline/news/1687086/budget-2010-key-cgt-changes

IveSeenTheLight

lvader wrote: »

CGT is only 18% for someone earning £25K

Oops your right, then the calculation is : -

(£160,000 - £ 80,000 - £10,100 ) * 0.18
(selling price - buying price - allowance) * CGT percentage.

= £12,582 CGT and a profit of £67,418 above your buy price of £80,000

dealsearcher

lvader wrote: »

CGT is only 18% for someone earning £25K

If their profit on sale of a property after deduction of allowances and losses exceeded £37,400 they would pay 28% on the excess.

IveSeenTheLight

dealsearcher wrote: »

If their profit on sale of a property after deduction of allowances and losses exceeded £37,400 they would pay 28% on the excess.

Are you sure on that?

silvercar

dealsearcher wrote: »

If their profit on sale of a property after deduction of allowances and losses exceeded £37,400 they would pay 28% on the excess.

IveSeenTheLight wrote: »

Are you sure on that?

Don't think the details have been announced yet. For savings interest it is normal to add the amount of interest to your income so effectively it is taxed at your marginal rate. I would expect here that it could be similar (though no mention of an even higher rate for top rate tax payers.)

Thrugelmir

IveSeenTheLight wrote: »

Are you sure on that?

This was previously the case. When CGT mirrored income tax rates, and the net gain was added to "earned income". To compute the tax payable.

As yet I haven't seen any official confirmation. But suspect it will be the case again.

This is probably just a first step in changing CGT rules. I wouldn't be surprised to see a 40% band next tax year, along with a 20% lower rate. The change today was to appease the critics.

So a few months to realise gains before the tax take rises.