Wembley Landlords and Second Homeowners Will Probably Save Money From The Proposed New CGT Changes

If the proposals were adopted in full, some Wembley landlords would pay £14,000 less Capital Gains Tax than they would currently

Wembley Landlords and Second Homeowners Will Probably Save Money From The Proposed New  CGT Changes
The government borrowed £394bn this financial year (April ‘20 to April ’21). This figure does not include the cost of the November lockdown and support measures, which means the final bill will probably be over half a trillion pounds. Ultimately, these billions will need to be paid back to cover the cost of Coronavirus.
 
The Office of Tax Simplification (OTS) published a report for tax reform and, as was predicted by many in the press, the Government Dept suggested the Chancellor contemplate readjusting current Capital Gains Taxation (CGT) rates with a person’s own Income Tax rates. This would mean increasing the rate of CGT for selling a buy to let property from 28% to 40% for high-rate taxpayers and 45% for additional rate taxpayers. To add salt to the wound, the OTS is suggesting cutting the £12,300 annual CGT allowance.
 
This has led to many Wembley buy to let landlords contacting me in the last few weeks, wondering if this is the time to exit the Wembley buy to let property market, especially as they have been hit by growing levels of rental legislation and higher taxes.
With tax bills about to go through the roof, is this the time to
leave the Wembley buy to let property market?
 
Yet, like all things, the devil is in the detail as Wembley 2nd homeowners and Wembley landlords may well finish up having lower CGT tax bills with these new taxation proposals, even though the CGT restructurings are being introduced to raise the much-needed cash for the Government.
 
Apart from the suggested cut of the annual CGT allowance and increase in the CGT percentage rates, the OTS report also proposed reintroducing rebasing and indexation. In layman’s terms, the OTS are suggesting all gains made before 2000 would not be taxable (rebasing) and any capital gains would be calibrated to account for inflation.
 
So, what would that actually look like for a Wembley landlord? Let us assume we have a Wembley landlord who bought a Wembley buy to let property in 2000.
 
Under the current CGT rules
 
·        The average value of a Wembley property in 2000 was £133,900
 
·        Today, that same Wembley property has increased in value to £410,900
 
·        Meaning a profit of £277,000
 
·        As our Wembley landlord is a high-rate taxpayer (earning £60,000 a year), their CGT bill would, after the annual allowance, be £74,116
 
Under the new proposed CGT rules
 
Under the new proposals, the CGT payable (assuming the CGT rate of 40% and a lower annual allowance of £5,000) the same Wembley landlord would only pay £60,330 – a saving of almost £14,000.
 
And the savings don’t stop there. Remember, under the new OTS proposals, all capital gains made before 2000 would also be tax-free.
 
However, let us not forget the responsibility of the OTS is to report on tax simplification opportunities, not to set Government taxation policy. None of us have a crystal ball on what Rishi Sunak will do with CGT on buy to let property or second homes. Although, as time has always taught us about investments, often the worse thing to do is to make impulsive decisions on what MAY happen.

You have to remember, CGT only gets charged when you sell or transfer your investments, and most people use their rental investments to provide them with income. If you did sell up, the best 90-day building society accounts are obtaining 0.8% pa, the stock market is a rollercoaster (good luck with that) and Government 10-year bonds are paying a princely 0.324% pa... where else are you going to invest to get the income Wembley property investments provide?

Property is an asset you can touch, feel and ultimately understand. Maybe, this is the time (if you haven’t already) to take portfolio advice on your Wembley buy to let investments? Many Wembley landlords do so, whether they use our agency, another Wembley agency or you manage your property yourself. The service is free of charge, we don’t need to meet face to face as we can do it over Zoom and it’s all without obligation. I promise to tell you what you need to hear – not what you want to hear … what do you have to lose?
 
Abigail & the team at Grey & Co.
 

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Meet Abigail

  Hello, my name is Abigail, and I am the Grey in Grey & Co. I started working here in 2002 as a Junior Negotiator and have worked my way up the ranks since then. I took over running the company in 2014 and have been enjoying the roller coaster that is leadership ever since.   During my 20 plus years at Grey & Co I have dealt with the sale of over £100,000,000 worth of property and overseen the management of assets worth £250,000,000 for clients around the world.   I also had the pleasure of working with my father, the founder of Grey & Co, for 15 years before he sadly passed away and from him, I learnt the work hard ethic and our values today are still the ones that he founded the company on all those years ago.   Be Remarkable, Be Passionate, Be Humble and Be Better.   As a community centric boutique family agency, you couldn’t find a better partner to take with you on your property journey.

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