Bad Budgets & Behaviour
Wednesday 4th September 2024
Landlords are terrified by the prospect of the Treasury’s (or is that T-Rexury’s) higher Capital Gains Tax (CGT) in the upcoming October budget.
Buyers (and sellers) are worried about further increases to Stamp Duty being announced too.
Treasury Stamp Duty hikes are virtually instant, or have a short run-in time from announcement to being implemented.
Unless you have already agreed a purchase and are nearing exchange, there is little to be done to avoid the Stamp Duty increases, if you do want to go ahead and purchase.
The CGT threat is that they will ‘equalise’ it with Income Tax rates. Whatever, the ‘moral’ case made by the new Labour Government, the net effect of higher CGT is less investment - in anything subject to the tax.
Thanks to George Osborne, and all subsequent Tory Chancellors, CGT is higher on property than on other asset classes. Currently, at 24% vs 20% on the sale of stocks & shares.
If, as suggested, the CGT rate on the sale of investment property goes up to 40% or 45% from 24%, you can be sure that people will think twice before selling their properties.
My hunch is The Treasury recognises this and to maximise the tax ‘take' from an increased CGT, they will stagger the increases to drive owners to sell before the full higher rates take effect.
From a tax raising perspective, it makes sense to announce in the October Budget a raise in CGT to say 30% in April 25, and then the full 40-45% in April 26.
Putting the precise timetable and the exact percentages aside, you can be sure that CGT rises are coming and that many investors will be rushing to sell before the full rates are in place. The increase in CGT paid in the interim phase will be significant. Sufficient, probably for The Treasury to justify it to themselves. But at what cost to future investment?
Call me to discuss your situation.
Until next time,
PB
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