Capital Gains Tax: Boost for thousands of people with second homes
Wednesday 10 October 2007
Thousands of second-home owners and wealthier individuals were among the winners from yesterday's pre-Budget report, after the Government unveiled plans to slash the rate of capital gains tax from 40 to 18 per cent.
Currently, individuals are taxed at 40 per cent on any gains above £9,200 in any one tax year – although using taper relief, this rate can be reduced to as little as 24 per cent on assets held for 10 years or more.
CGT tends to hit holiday-home owners and residential buy-to-let landlords who are selling their properties, as well as wealthier individuals who realise capital gains when selling investments. However, as of 6 April next year, all capital gains above the personal allowance of £9,200 will be charged at a flat rate of 18 per cent – while taper relief will be scrapped. For those who don't make full use of taper relief, this will mean a 55 per cent reduction in their CGT bill, while even those who have held their assets for 10 years or more will pay 25 per cent less tax. Individuals will no longer need to hold on to their assets for many years to minimise their tax burden.
Gavin Oldham, chief executive of the Share Centre, said the changes could increase liquidity in some investments, as investors would no longer be forced to hold on to assets to benefit from taper relief. "This will provide a major encouragement for those investing in listed UK equities and should result in significantly improved liquidity," he said.
Gary Robins, chief executive of Hotbed, the UK's largest private investor syndicate, said the changes would be bad for smaller companies and would encourage short-termism. "Taper relief was put in place to encourage investment in unlisted securities and reward private investors for holding unlisted shares for longer periods of time," he said.
"Doing away with taper relief altogether means that there is no longer any reason for investors to hold unquoted shares for a longer period.
"It will have the undesirable effect of encouraging short-termist investing."
Caroline Bevan, senior manager at PricewaterhouseCoopers, said while 18 per cent was a competitive rate, there remained a danger that the increase would drive businesses overseas.
Ruth Dooley, a tax partner at Grant Thornton, the accountants, pointed out that employee share schemes also stand to be adversely affected by the changes. Currently, employees are only taxed at 10 per cent if they hold their shares for two years or more. Under the new regime, that changes to 18 per cent.
Greg Limb, a director at KPMG, the accountants, added that the removal of tax breaks for employees was at odds with previous government policies. "This seems at odds with the Government's stated aim of encouraging entrepreneurship and investment... many listed companies will feel sore that there will be no incentive for them to encourage their staff to hold their shares," he said.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens