New CGT rules on disposal of Residential Property Investments

Conrad

You 'all may recall me banging on about 2008 mortgage regulation tightening would lead to generation rent. Almost everyone thought this a non point.


My prediction this time is thus;


Mortgage regulation still means millions of people will not be able to buy, and now that B2L is becoming more difficult, a good many of those renters will have nowhere to rent either.


The argument prices will fall is nonsense, and even if they did, those frozen out of the mortgage market cannot buy anyway.
Furthermore tax increases mean rising rents.


Bring on the new generation that can neither buy nor rent.

cells

michaels wrote: »

We sold in Jan and will have to pay 20k before the end of this Jan...but with interest rates so low we haven't really benefitted that much.

Aren't there some figues in another thread suggesting the 3% non-ppr cgt will raise about 800m pa suggesting of order of 25 billion in annual transactions or 125k transactions at 200k a pop - does that sound reasonable?

it is too low a estimate imo

~110,000 BTL mortgages were given out over the last 12 months but there would also have been a significant number of cash purchases and indirect buy to lets via residential mortgage equity. Also the BTL sector is growing by about 300,000 a year so surely there must be at least 300,000 properties a year which will fall into the second home or BTL category.

Total property transaction are in the region of £170B a year of which 3% flat tax would be £5B a year so 0.8B/5B = 16% of properties as BTL. Actual figure is higher as first £40k is exempt from the 3% tax. My guess is they estimated that the property transactions are 22% BTL or second homes which would give about £850m a year extra in this 3% tax. However I think 22% of property transactions as BTL or second home are wrong I think its as high as 40% or maybe even more in which case the tax take is going to be almost twice the £0.8B or so predicted

Graham_Devon

Conrad wrote: »

The argument prices will fall is nonsense, and even if they did, those frozen out of the mortgage market cannot buy anyway.
Furthermore tax increases mean rising rents.


Bring on the new generation that can neither buy nor rent.

If an entire generation cannot buy or rent, how will prices support themselves?

cells

Conrad wrote: »

You 'all may recall me banging on about 2008 mortgage regulation tightening would lead to generation rent. Almost everyone thought this a non point.

My prediction this time is thus;

Mortgage regulation still means millions of people will not be able to buy, and now that B2L is becoming more difficult, a good many of those renters will have nowhere to rent either.

The argument prices will fall is nonsense, and even if they did, those frozen out of the mortgage market cannot buy anyway.
Furthermore tax increases mean rising rents.

Bring on the new generation that can neither buy nor rent.

I don't think this is going to stop BTL growing, maybe marginally but not a lot. If the 3% surcharge was 10% then yes it would kill BTL and it would also cause a house price crash (or no price growth for a long time so no nominal crash but a real term crash)

At 3% it will just bring in more tax money potentially more than their estimated ~£800m a year

cells

Graham_Devon wrote: »

If an entire generation cannot buy or rent, how will prices support themselves?

if the BTL sector stops expanding what will happen is that more FTBs must step in which will require prices to fall or wages of FTBs to rise.

There will still be lots of people who cannot afford to buy and with a static BTL stock and a rising population people will need to rent more and more dense.

If the rental sector goes from 2.5 persons per rental property to 3.5 persons per rental property and there are 5 million rental properties there is the "space" for 5 million more people to become renters while no additional rental stock growth.

of course renters will bid as high as they can afford to not have to share with strangers so rents should rise if occupancy levels rise. This is whats been happening in London for 15-20 years now. With person per home having increased from ~2 to ~2.5

happylucky

antrobus wrote: »

Possibly.

But non-residents are already required to report disposals of residential property and cough up any CGT within 30 days.

https://www.gov.uk/guidance/capital-gains-tax-for-non-residents-uk-residential-property

Yes. I understand this was introduced directly to limit tax evasion...land registry data + 30 day lag with no data then HMRC kicks off their superpowers as the person in question has become a tax law violator by default. And obviously the new residency rules which dovetail nicely with the revised main residence and ppr rules give opportunity for a bit of unanticipated extra revenue from any naive investors either foreign or expat.

I would imagine this is simply the same story...wasn't there a bit of publicity lately about a few UK landlords evading income & cgt? Anyway, it's fair to expect the tax office will be all over every BTL landlord over the next few years, wherever they reside.

Thrugelmir

happylucky wrote: »

Anyway, it's fair to expect the tax office will be all over every BTL landlord over the next few years, wherever they reside.

Been a specialist HMRC unit in place since September 2013.

By 2020 everyone will have their own online tax account. HMRC will connect with Land Registry, DVLC etc etc. There's already huge sums of money going into the development of sharing Governmental Databases across the entire EU as well. As flying has done to travel. This will will make the world a far smaller place with fewer places to hide.

chucknorris

happylucky wrote: »

Yes. I understand this was introduced directly to limit tax evasion...land registry data + 30 day lag with no data then HMRC kicks off their superpowers as the person in question has become a tax law violator by default. And obviously the new residency rules which dovetail nicely with the revised main residence and ppr rules give opportunity for a bit of unanticipated extra revenue from any naive investors either foreign or expat.

I would imagine this is simply the same story...wasn't there a bit of publicity lately about a few UK landlords evading income & cgt? Anyway, it's fair to expect the tax office will be all over every BTL landlord over the next few years, wherever they reside.

I don't think the rule is being introduced for that reason, I think it is being introduced because there wouldn't have been a suitable advance payment paid to cover the CGT amount in the preceding tax year (as I outlined above) due to the one off nature of capital gains connected with property sales.

But I do want HMRC to clamp down on (all) tax evaders, not just landlords. But it isn't good for honest landlords if some of their competitors are cheating, and it also means that every honest tax payer ends up paying more tax.

CLAPTON

Thrugelmir wrote: »

Been a specialist HMRC unit in place since September 2013.

By 2020 everyone will have their own online tax account. HMRC will connect with Land Registry, DVLC etc etc. There's already huge sums of money going into the development of sharing Governmental Databases across the entire EU as well. As flying has done to travel. This will will make the world a far smaller place with fewer places to hide.

sounds good : with the massive expected decrease in tax evasion, we can all expect tax on honest people to fall substantially.
I won't spend the extra money just yet though.........

happylucky

http://www.telegraph.co.uk/finance/personalfinance/tax/12020346/HMRC-declares-an-end-to-hiding-money-in-another-country-from-January.html

I would agree with the sentiment that tax evasion should be eliminated...still a little nervous about the capability of HMRC to assess and implement that fairly and effectively though.

In any case, the drive to eliminate tax evasion continues (above link) with exchange of information on British residents across 90 countries inc property investment companies, trusts etc.