2016 Budget Changes on Capital Gains Tax – What It Means for The Property Market
Capital gains tax on property* and other assets was first introduced in 1965 by James Callaghan, the then Chancellor of the Exchequer. Initially set at 30%, capital assets, such as property, became taxable to stop UK residents from switching their income into capital. At the time, a £9,500 threshold was set by the UK government.
Applicable when an asset such as business, shares – or property is sold, the capital gains tax on property paid is entirely dependent on the value of the asset, and any income you draw from that asset.
Landlords across the UK are the most affected by the changes to capital gains tax on property. On 16th March 2016, the HM Treasury and The Rt. Hon George Osbourne announced his budget, which included notable information about the future of capital gains tax on property.
How Much is Capital Gains Tax and The 2016 Budget
As of April 2016, capital gains tax on property was radically changed. Basic rate taxpayers are now liable for a capital gains tax on property of 10% – down from 18% and those on higher rates of income tax are liable for 20% – down from 28%.
HM Treasury and The Rt. Hon George Osbourne stated that an 8% surcharge is to be paid on residential property with carried interest, such as the share of profits or gains paid to asset managers.
Given that capital gains tax on property is only applicable to UK residents with a second, third or more properties and is not applicable to your main residence, buy-to-let landlords could face a hefty tax bill when they come to sell the property.
If you are looking to sell your property & are eligible for capital gain tax, speak to your accountant for advise or any questions about just how much is capital gains tax on your property. For any advise on selling house call us TODAY on: 0800 068 7935.
What do the Changes in the Capital Gains Tax on Property Mean for Homeowners and the UK Property Market?
With an acknowledged shortage of properties available in the UK, it has been argued that the changes to capital gains on property is to encourage buy-to-let landlords to sell their homes, releasing more homes onto the UK property market for eager buyers to snap up, whilst encouraging more affordable homes for first-time buyers to get their foot on the ladder.
Buy-to-let landlords are now considering whether the time is right to sell up, believing that their investments are no longer finally viable thanks to the new capital gains tax property scheme.
Stuart Gregory, of mortgage brokers Lentune Mortgage Consultancy, publicly stated that the new capital gains tax on property is a direct incentive for more investors to sell.
Springbok Properties helps landlords who wish to sell their homes quickly with no upfront costs for up to 100% of the property’s market value. Call Springbok Properties TODAY on 0800 068 4015 and speak to one of our award-winning customer service agents to find out more.
How to Minimise Capital Gains Tax
The following are ways that you can avoid paying capital gains tax on property you own:
Use the Annual Tax-Free Allowance
Capital gains tax is paid on any gains you make above your annual tax-free allowance, which in 2017 is £11,000. Homeowners are advised to use their annual exemption as it cannot be carried forward into 2018.
Spread Any Gains Over Tax Years
Instead of selling two or more properties immediately, landlords can avoid capital gains tax on property by selling their assets over two or more tax years. This allows property owners to take advantage of two separate year’s capital gains tax on property allowances which total £22,200.
Offset Your Losses
By deducting your capital losses from your capital gains, landlords can reduce their amount of payable tax. A gain of £25,000 and a loss of £10,000 can be calculated as a net gain of £15,000. By calculating losses as gains as one and the same figure, you can reduce your overall tax bill.
Reducing Your Taxable Income
Capital gains tax is calculated by the rate of income tax paid. By reducing your taxable income, you can reduce the amount of capital gains tax paid. This is especially relevant when considering capital gains tax on property. By lowering your capital gains tax rate, by 28%-18%, homeowners can save themselves over-paying on capital gains tax when selling a property.
Gifting to Your Spouse
Capital gains tax on property does not apply to any gifts you may offer or receive from a spouse. Not only that but, any gift to a spouse allows you to take advantage of capital gains tax-free allowances of up to £22,500.
One Final Thought on Capital Gains Tax on Property
Tax avoidance is a common practice to avoid paying capital gains tax on property and other assets. Tax evasion is, however, illegal. Not declaring assets to HMRC could result in a large fine.
Springbok Properties is committed to providing comprehensive support and guidance for homeowners & landlords. To find out more about on get your house sold for up to 100% market value, call us today on: 0800 068 7935.
*Please note this article does not constitute advice and is supplied for information purposes only. Springbok Properties is not permitted to give financial or tax advice and we would encourage you to seek independent advice from a tax expert.