Capital gains tax on property reduced from 40% to 18%

[Upwind]

Also posted in in the news section but thought it might get more attention here - this is really such a massive change.

frombusiness.timesonline.co.uk/tol/business/economics/pbr_2007/article2625659.ece the times

"Currently, higher rate taxpayers who sell a property that is not their main residence, or shares in companies listed on the main stock market - and make a profit of more than £9,200 - pay as much as 40 per cent tax on their profits if they sell within three years. After ten years, the effective rate of tax falls to 24 per cent. They will now just pay the 18 per cent flat rate."

"Small businesses will be the losers under the new regime. Alex Henderson, a partner at Pricewaterhouse-Coopers said: ?An entrepreneur who expected to pay 10 per cent on the business they?ve built up will now pay 18 per cent. It?s unhelpful that it?s such a broad brush measure. It could have been more targeted [at private equity].?"

I suppose a lot of those politicians have multiple properties. Clearly they don't give a toss about the small businesses that really contribute to our economy; rather than sucking money from the least well off as property speculators tend to do. angry

Reading more about this here - this change gives an incentive for property traders to rent out their flats/houses to tenants for six months to minimise tax.

Meaning that tenants are likely to be forced to move even more often than now. Labour really don't care much about the less well off, do they?

whats the incentive to rent out for 6 mo? don't get that?

yes small business will now pay more if they sell after 2 years, but the 10% tax was a massively good wheeze while it was there, they were effectively making the money but leaving it in the company (therefore not paying tax on withdrawing it - and lots were actually withdrawing it via loan accounts anyway), then winding up the company, taking the final payment as a capital extraction and only paying 10% tax.

It could probably have been more targeted at private equity players, but in all honesty it was a ^loophole6 that had just been getting bigger and bigger and closing it isn't unjust at all.

And to say it is against the well off - well you have to have made the gain to pay it, it doesn't apply on your own home, so you have the money.

removing the incentive to keep a property for 3 years is a bad idea. a very very bad idea. I was considering voting labour actually but I won't now, just for that.

I don't particularly agree with the point about small businesses paying 18% on profits on the sale of their business though - we are talking about profits after all (not net worth). 18% isn't that much really.

cs - it doesn't so much offer an incentivce to rent out for 6 months, but it does take away the incentive to rent out for 3 years plus. and it probably will make living in rented housing even less secure than it is now.

ok, I see but the 3 years thing wasn't a massive incentive, it went down from 40% to 38% (95% of 40%) in years 3-4. If you wanted to sell you wouldn't be hanging on until the 3 years just to save that 2%. Yes 18% is far lower, but with all the otehr costs associated with buying and selling property do you really think it would become a traded commodity?

And most tenants have very little security of tenure anyway, I don't think this would change it.

the tax on the sale of a small business often IS on the net worth of that business, as the owner will have usually built it up from scratch. I still don't have a problem with it though, as I said earlier it was a good wheeze while it was there for alot of people.

Property traders currently treat their profits as income and are taxed as such - these changes give them a huge incentive to rent out their properties for 6 months so as to be charged a significantly lower rate of tax, e.g. from the higher rate of income tax down to 18% This is very bad for tenants who have no way of telling if a potential landlord is in it for the longterm or has treated previous tenants in this way.

This change should be massive news. It will also make buy-to-let more attractive so pushing house prices up.

smallwhitecat - maybe they think it will prevent buy-to-let landlords from putting their properties on the market at least until the new budget takes effect?

While further reducing the homes available to first time buyer families, it could keep prices up until the next election. Many of our politicians own multiple homes and benefit themselves, also home owners have more of a stake in their community so probably more likely to vote!

If there is one thing this gov has shown time and time again it will do absolutely anthing to keep up property prices they are after all just about the sole driver of our 'no more boom and bust miracle economy' unfortunatley this is just making the pain even bigger whn it happens