Capital Gains Tax: Second-home owners are spared punitive rise
Wednesday 23 June 2010
Capital Gains Tax (CGT) was increased by 10 per cent for higher rate taxpayers yesterday, but despite the jump, investors breathed a sigh of relief as the new government decided not to impose a new upper rate of 50 per cent, as many had feared.
George Osborne increased the upper rate of CGT – paid on profits made from asset sales such as shares and second homes – to 28 per cent from midnight last night. The pill was sugared, however, as the 10 per cent relief rate offered to entrepreneurs was increased to cover disposals worth up to £5m, while the rate for basic rate taxpayers will stay at 18 per cent.
The Chancellor said the previous flat rate of 18 per cent had led to one of the "most chaotic" tax regimes he had inherited since taking charge at the Treasury last month.
He said that the under the previous system, "some of the richest people in this country have been able to pay less in tax than the people that clean for them". The Government had considering a system of tapering and allowances, which would have seen a new top rate of as much as 50 per cent, but decided it was too complicated to introduce. The personal CGT allowance was frozen at £10,100.
"It will come as some considerable relief to many entrepreneurs holding assets with latent capital gains that the rate was not increased more in line with employment income, as had been widely reported in the press," said David Brooks, a tax partner at accountancy group, BDO. "An increase to 28 per cent is significant but it could have been far worse. Fear that the rate would be increased to 40 per cent or even 50 per cent has seen a number of wealthy taxpayers hastily implementing planning to capture the benefit of the 18 per cent rate."
Some cast doubt on whether yesterday's changes would lead to huge new tax bills for those that have hitherto paid less tax than their staff, however. "The truth is that the CGT does not really raise that much in revenues because a relatively small group of people pay it," said Ashley Greenbank, a corporate tax partner at Macfarlanes. "It is also a tax that can only be worked out when costs are taken into account, so we can't really say whether it will lead to an increased number of people paying more tax than their cleaners."
Entrepreneurs were the main beneficiaries of yesterday's changes. The entrepreneurs relief rate of 10 per cent was extended to those making up to £5m from the sale of their business: an increase from the previous £2m level. However, a number of experts said that Mr Osborne could have gone further.
"The changes are not actually as generous as they first appear," said Claire Evans, a tax director at Pricewaterhouse Coopers. "The entrepreneur needs to hold at least five per cent of the company... to benefit, so the employee that has been given shares as an incentive will still pay CGT at either 18 or 28 per cent."
Entrepreneurs did benefit from other measures, however, such as the one percent cut in small business corporation tax, from 21 per cent to 20 per cent next year and the extension of the enterprise finance guarantee, under which the Government guarantees 75 per cent of loans for companies with a turnover of less than £25m.
Yesterday's announcement was bad news, however, for those that have pumped savings into the buy-to-let property market. Those that found disappointing returns from savings rates and instead put money into second homes to let, found themselves facing the prospect of higher CGT charges.
"In a few hours CGT for higher and additional rate taxpayers will rise from 18 per cent to 28 per cent," said David Salusbury, the chairman of the National Landlords' Association yesterday. "Although it is disappointing that the Chancellor has failed to recognise the distinction between long-term investment in residential property and short-term speculation, the immediate increase is not as high as the trailed 40 per cent. Nevertheless, the increased rate will affect the vast majority of landlords who supplement a modest income with their lettings activity."
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
The best deals on personal loans: Peer-to-peer providers are more competitive for smaller sums
China stock collapse: Five things you need to know about 'Black Monday'
Questions of Cash: 'Our dividends seem to have disappeared when TSB was bought and then born again'
My Tinder date asked for a refund when I declined a second meet up
The most expensive cities in the world 2015
- 1 Barbarians vs Samoa interrupted by sprinklers as fans criticise lack of Wi-Fi and poor seating at West Ham's Olympic Stadium
- 2 Watch the Supermoon live: How to see the brightest Moon of the year tonight
- 3 Hulk Hogan wants to be Donald Trump's running mate in the US Presidential election
- 4 Blood Moon and Supermoon: September to bring brightest – and dimmest – full Moon of the year on same night
- 5 David De Gea to Real Madrid: Real finally get their man with £29m bid for Manchester United goalkeeper
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
'Women only' train carriages: Jeremy Corbyn unveils radical move to tackle public harassment
Black holes are a passage to another universe, says Stephen Hawking
Iain Duncan Smith 'should resign over disability benefit death figures', says Jeremy Corbyn
Tony Blair attacks Jeremy Corbyn's 'Alice In Wonderland' politics
Theresa May says migrants should be banned from entering the UK unless they have jobs lined up
iJobs Money & Business
£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...
£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...
£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...
£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...
Day In a Page
In a sandbanks location, moments from the beach, this three-bedroom apartment has a large open-plan living area and a south-west facing balcony.
This four-bedroom home has an annexe accessed from the side of the house, with potential for improvement and conversion subject to the necessary permissions.
In the heart of the hamlet of Wardley, this five-bedroom period home offers countryside views and a stylish interior, with original features and open fireplaces.
Offering countryside views and landscaped gardens, this three-bedroom Grade II-listed lodge has a spacious conservatory and a large cellar that could serve as a workshop.
Set in approximately 1.5 acres, this four-bedroom home comes with a second, detached property that's currently used as an annexe.
In the hamlet of Newchurch, this former parish church is now a four-bedroom home complete with clock tower and eyrie.
Offering scenic views from a large balcony and sun terrace, this four-bedroom home has a wraparound garden and a heated swimming pool.
Offering views across the Humber and East Yorkshire Wolds from a glass panelled balcony, this four-bedroom barn-style home befits a life of leisure.
This four-bedroom home offers versatile accommodation with annexe potential; features include a hot tub, sauna and Norwegian BBQ hut.
Well-located for schools, colleges and the town centre, this contemporary thatched cottage offers flexible living space with six bedrooms.
Built in 1907, this four-bedroom Edwardian period home has been refurbished by the current owners, retaining many original period features.
Surrounded by landscaped gardens, this five-bedroom home offers living space across three floors.
This lovely country home in Burnham Market is currently run as a popular holiday cottage, with five en suite bedrooms and colourful gardens.
This three-bedroom 17th-century former village bakery is just a few miles from the East Sussex coast.
Set on a landscaped plot, this light and airy four-bedroom home comes with a log burner in the lounge, a fitted kitchen and an open-plan ground-floor layout.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Built on a former chapel site, this impressive four-bedroom home boasts balconies, stunning views and contemporary modern living.
This three-bedroom house is situated in a quiet mews and set over three floors. Features include glazed staircases and high ceilings.
A period townhouse set over four floors, this five-bedroom home was built in the 18th Century and retains many original features.
With five bedrooms, this spacious home offers beautiful gardens and modern interiors - set within the popular market town of Bingley.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This first-floor flat comes with two bedrooms, an impressive open-plan reception room and two lovely roof terraces.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Moored at Taggs Island and reached via a pretty garden, this two-bedroom houseboat has a vaulted reception room and skylit garden studio - currently a beauty salon.
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
A contemporary house spread over three storeys, this three-bedroom detached home has large sliding doors that open out to the River Quaggy.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
This former village bakery, dating back to the 17th century, is now a three-bedroom detached home just a few miles from the East Sussex coast.
On the picturesque Isle of Man, this four-bedroom character home has a ground-floor shop that's currently run as a newsagents and a flat that would make an ideal holiday let.
In a new collection of flats, this first-floor two-bedroom apartment offers ample entertaining space and a prime view of Furze Green from a private balcony.
This three-bedroom stone-built cottage currently trades as the village store with a restaurant in the annexe and family accommodation on the upper floors.
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.