02 August 2024
Average landlord £11,000 worse off if capital gains tax rates aligned with income tax rates
New analysis from Quilter, the wealth manager and financial adviser, has found that if capital gains tax (CGT) rates were aligned with income tax rates then landlords selling their properties in the UK would on average be £11,000 worse off.
Although promises to change the rate of CGT were absent from Rachel Reeves’ speech in the House of Commons today, she did reveal some of the other measures she was taking to close the £20bn funding gap Britain faces such shutting down certain infrastructure projects.
However, there have been reports that further tax changes might be required to shore up public finances.
Most homeowners benefit from private residence relief meaning they pay no CGT when selling their home, however landlords or those with second homes are liable to pay CGT on any gains following the sale of a property.
If you make a gain after selling a property, you'll pay 18% CGT as a basic-rate taxpayer, or 24% if you pay a higher rate of tax under the current rules. However, if rates were aligned with Income tax rates then a basic rate landlord or second homeowner would pay 20% CGT and 40% if they were higher rate taxpayers.
|
Region |
Average gains at sale |
Tax @ 18% BR |
Tax @ 20% BR |
Increase |
Tax @ 24% HR |
Tax @ 40% HR |
Increase |
|
London |
£137,000 |
£24,120 |
£26,800 |
£2,680 |
£32,160 |
£53,600 |
£21,440 |
|
South East |
£103,000 |
£18,000 |
£20,000 |
£2,000 |
£24,000 |
£40,000 |
£16,000 |
|
East of England |
£92,500 |
£16,110 |
£17,900 |
£1,790 |
£21,480 |
£35,800 |
£14,320 |
|
South West |
£90,000 |
£15,660 |
£17,400 |
£1,740 |
£20,880 |
£34,800 |
£13,920 |
|
East Midlands |
£70,000 |
£12,060 |
£13,400 |
£1,340 |
£16,080 |
£26,800 |
£10,720 |
|
West Midlands |
£69,000 |
£11,880 |
£13,200 |
£1,320 |
£15,840 |
£26,400 |
£10,560 |
|
Wales |
£61,000 |
£10,440 |
£11,600 |
£1,160 |
£13,920 |
£23,200 |
£9,280 |
|
North West |
£56,500 |
£9,630 |
£10,700 |
£1,070 |
£12,840 |
£21,400 |
£8,560 |
|
Yorkshire & The Humber |
£52,000 |
£8,820 |
£9,800 |
£980 |
£11,760 |
£19,600 |
£7,840 |
|
North East |
£30,000 |
£4,860 |
£5,400 |
£540 |
£6,480 |
£10,800 |
£4,320 |
|
UK |
£74,000 |
£12,780 |
£14,200 |
£1,420 |
£17,040 |
£28,400 |
£11,360 |
*Figures based off of Zoopla data
Shaun Moore, tax and financial planning expert at Quilter said:
“During Labour’s election campaign the party was tight lipped on its plans surrounding CGT. While senior Labour figures were forthright in their conviction that the party would not raise national insurance or income tax, no one was willing to get drawn on what it might do to other taxes such as CGT. If plans such as aligning CGT with income tax rates do become a reality, then we could see some significant repercussions in the short and long term. Unless anti-forestalling measures are announced with any plans then we could see a surge in property sales as homeowners rush to sell their second properties before new legislation comes into place. This could temporarily boost housing market activity, and many people will reconsider their property portfolios, potentially shifting their investments to other assets with more favourable tax treatments.
“The truth of the matter is though; at this point nothing has been announced and unless selling a second home or a buy to let is already part of your plan then making decisions based on what might happen is not sensible. However, these figures do serve to illustrate how much more tax might have to be paid in the future should this policy proceed.”
