Chancellor Rishi Sunak has recently announced that he would freeze Capital Gains Tax allowances to assist in procuring the funds required in covering the cost of the pandemic, as by freezing the allowances the Treasury can procure the needed additional revenue through means of fiscal drag.
What will this mean for Landlords?
“The government is increasing its tax take by relying on inflation while keeping allowances the same” – Kevin Sefton, CEO of Untied, the UKs Personal Tax App.
This could spell issues for landlords, as through the means of fiscal drag one will find themselves in a higher tax bracket, as the tax allowance thresholds (Currently at £12,300 per year) will be overtook by inflation, thus leaving you worse off as you’ll be taxed on money with increasingly less buying power if you sell a property down the line.
As the Capital Gains Tax is paid by a landlord when they sell a buy-to-let property or a second home, on the gain or profit made by them when selling, it also results in lost profit. This ultimately allows the government to increase its tax revenue without increasing tax rates- tax revenue will rise 47 percent by 2026, from £9.8 billion in 2020 to £14.4 billion under the new changes.
The current tax rates on Capital Gains Tax of 18% for basic rate taxpayers and 28% for higher rate taxpayers thankfully remain unchanged however, as there were proposals to increase the rate to align more with income tax rates which we are delighted to say didn’t come to fruition. However, It seems that in the wake of the Covid-19 pandemic people are having to share the bill, including Landlords. Is increased tax across the board the new precedent after the pandemic? It may appear so as Corporation Tax has also been increased to 25%. However, only time will tell if there are any other tax increases and if there is you’ll hear about it first at Imperial Claims Consultants.
If you are an insured homeowner or a landlord, and you need to make an insurance claim following a fire, flood or any other unfortunate large-scale loss or damage to your property, then contact us now – it’s very likely we can help you with our professional, award-winning and compassionate service. We also take pride in providing you with vital news and recent developments which concern you and your property and business.
Additionally, you can visit here for further official information and advice on Capital Gains Tax