CGT "simplification" - Pleading the small investor's case.

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    CGT "simplification" - Pleading the small investor's case.

    Like many landlords I am upset and very worried about the effect of the proposed Capital Gains Tax “simplification” will have on my BTL investment and thus my retirement income.
    I would say that now is the time to object/plead/argue against this. I am not a professional landlord or a tax expert but I have started to produce my own letter to Rishi Sunak, local MP, newspapers etc.
    Can I dry run it here with the good people of the landlord forum? As I say, I am not a tax expert so go easy on me…..
    1. Equating CGT with income tax does not “simplify” anything. CGT tax is paid on an asset or business that someone has laboured over and built up over a number of years. There is considerable risk in such an investment and you can make a loss or even go-bust. Correspondingly, Income is a one way bet. The risks are not remotely comparable therefore the tax regimes should not be either.
    2. BTL owners are not all rich fat cats. Like many other small-time landlords, I have a single BTL which I bought 10 years ago. The property is basically my “pension”. Why does the government insist on punishing me over and over for this decision? I am lessening the burden on the state by ensuring that I have a modest income in retirement. Most of us do not own vast tracts of land or a BTL empire!
    3. BTL asset gains are crystallised in a single year when the owner sells, so this is in effect a retrospective tax. My own (single) BTL house has increased in value over 10 years by say 200k. If I made a similar amount of INCOME over 10 years it would be taxed using a separate tier structure for each year. So 20k a year income taxable at zero% or 20% x 10 years. The tax regime on a BTL kicks in when the BTL is sold and can’t be spread out - so only a single year’s CGT structure will apply. By default nearly all of the landlord’s gains would attract the highest rate. This was grossly unfair before CGT increases and will be unthinkable afterwards.
    4. Government is breaking an implied deal with investors. BTL (and other) investors made their historical decision sometimes years ago to invest in a BTL. They considered the risks, the market and the tax regimes that were in place. The government’s CGT strategy was presumably in place to encourage investment. Taxes are modified from time to time - but to simply double a tax without warning is apocalyptic and wrong – because they are effectively taxing decisions made years ago. Is there a legal challenge here?
    5. Landlords should not be made the Covid-19 Scapegoat. The government has ploughed money into various furlough-type schemes to support the country during the pandemic. Landlords have not received any of this money. Quite the opposite – Landlords have been banned from evicting tenants (even really bad tenants) and some landlords have been taken advantage of by unscrupulous tenants who have simply stopped paying rent, because they can. Landlords have given a lot yet received nothing from the Covid-19 pandemic. It feels disingenuous to try and raise even more cash from Landlords.
    6. These changes will kill-off the rental sector. Who, in their right mind, would invest in a BTL if CGT goes up to the proposed levels. It’s a business stuffed with risk – rent default, expensive repairs, legal liability. Many Landlords will cash in (if they can) and wont be replaced. There could be a dire lack of stock and corresponding rent increases which have a crippling effect on labour mobility and young people who may be forced to live at home till later in life.

    Am I one the right track? Anything to add?

    #2
    You are absolutely correct. Moreover, by making Britain a high tax economy, people will be discouraged from keeping their money in the country

    Comment


      #3
      thanks for the encouragement. I am also hoping that somone will go through each point and fact-check before i send this to MPs etc. This CGT issue is so bad that i am almost inclined to think that I have missinterpretted it!!

      Comment


        #4
        Someone somehow has got to pay for Covid & Brex****. CGT for assets that are not your actual home are very very likely targets.

        That's reality, we have to deal with it.


        There's always been ups & downs over time for landlords with property rentals, just as there's always been downs & ups over time for tenants with property rentals.
        I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

        Comment


          #5
          Originally posted by BTL_Bertie View Post
          Taxes are modified from time to time - but to simply double a tax
          They aren't proposing to double the tax on property.
          It's a 2% increase on the lower rate and a 12% increase on the higher rate.
          If it ever happens.

          Comment


            #6
            Originally posted by boletus View Post
            It's a 2% increase on the lower rate and a 12% increase on the higher rate.
            If it ever happens.
            Being picky it's a 12% increase on the lower rate and a 43% increase on the higher rate, but I know what you mean.

            Unless you live in London, have a huge property unusual for renting or have owned a property for a very long time, the effects aren't that dramatic.

            I sold a property a couple of years ago and it would have added a few hundred quid to the tax bill under the proposed change.
            It wouldn't have changed my decision to buy the property, sell it or to become a landlord in the first place.

            Losing the personal allowance would sting.
            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

            Comment


              #7
              Originally posted by jpkeates View Post
              Being picky it's a 12% increase on the lower rate and a 43% increase on the higher rate, but I know what you mean.
              Ha ha! Yes, suppose you're right. If that's confused anyone, the proposals are;

              Increase the lower rate from 18% to 20%. Increase the higher rate from 28% to 40%.

              Originally posted by jpkeates View Post
              Losing the personal allowance would sting.
              They've recognised the unfairness of that and have proposed reintroducing inflation relief, might even work out better.

              Comment


                #8
                Originally posted by boletus View Post
                They've recognised the unfairness of that and have proposed reintroducing inflation relief, might even work out better.
                Excel is working overtime now!!!

                When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                Comment


                  #9
                  jpkeates,

                  sadly thats exactly the situation i am in. one largish property rather than a raft of smaller ones. so i can only sell as a whole and thus take the tax hit all in one year. most of my CGT will be at the higher rate. a 43% increase in the CGT bill does not seem in the slightest bit fair. i wonder what the chances are of beating the tax and selling before it is introduced. thats the perils of having all your eggs in one basket. As i say this is (was) my pension effectively (accidental landlord - former home) - i am not a particularly wealthy individual. Feels like the politics of envy (again).

                  Comment


                    #10
                    theartfullodger,

                    i would say that this is a permenant and recurring down. Every 10k in capital apprciation in the future (should one decide not to sell) will only be worth 6k or even 5.5k. Not really worth taking the risk for. Wish I hadnt.
                    Having said that - if you are a student landlord in a non rising market then i guess it matters less. Its the perfect storm for me.

                    but i guess no-one sheds a tear for landlords!!

                    Comment


                      #11
                      BTL_Bertie,

                      Could you not just equity release/ remortgage to the hilt and let the taxman whistle for it ?

                      Comment


                        #12
                        Originally posted by BTL_Bertie View Post
                        a 43% increase in the CGT bill does not seem in the slightest bit fair.
                        How's that going to work out after inflation relief?

                        (accidental landlord - former home)
                        Have you worked out your CGT bill?

                        the perils of having all your eggs in one basket.
                        What has changed? You knew this already (or should have known).

                        Comment


                          #13
                          At present the capital gains between "job earnings" and £50k level is charged at 18% rate and the additional capital gains is charged at 28% rate.

                          If the capital gains tax rate has to be raised to a 40% rate , I would propose the capital gains tax starting level at :

                          £ 0 - £12,500 at 0% rate. ( personal allowance )
                          £12,501- £50,000 at 18% rate
                          £50,001 - £325,000 at 28% rate
                          £325,001 and above at 40% rate.

                          Comment


                            #14
                            write to your MP

                            Comment


                              #15
                              I thought the other proposals were to lower the Personal Allowance?
                              What seems clear to me is that they only want LLs with several properties now, especially married ones who can transfer their allowances .So single, only one or two properties you are stuffed
                              They have so many on UC/low wages especially since Covid and no LA housing. A landlord with limited resources cannot shoulder the risk of non-payment ,evictions as easily as one who has several properties who can just shrug losses off on one safe in the knowledge that the others will bring in a good return

                              Comment

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