Autumn Statement: Plans for new capital gains tax on wealthy foreigners could backfire on thousands of British people

Experts warn measures to make overseas investors ‘pay their share’ could also hit expats with 28% levy

Government plans to target wealthy foreigners who have been buying up property in London could backfire and hit thousands of British people who have chosen to live abroad, experts have warned.

Yesterday the Deputy Prime Minister Nick Clegg confirmed that discussions were underway to introduce capital gains tax for non-UK based real estate owners in next month’s Autumn Statement.

Mr Clegg said the plans, currently being considered by the Treasury, were a way of making rich foreign investors “pay their share”. The new measure would impose a 28 per cent tax on the sale of all second homes in the UK owned by people registered as living overseas.

“We are an open economy and we don't want to pull up the drawbridge - that would be bad for the country,” the Lib Dem leader said.

“But we certainly want to make sure that people who invest very large amounts of money into properties in central London locations - which more often than not then stand empty - pay their fair share of tax on those transactions.”

Tax experts have warned that the planned changes could reduce the attractiveness of the UK property market, while also impacting upon thousands of British expats who have held onto residences in this country, the Daily Telegraph reported.

The Liberal Democrat leader also said he would be entering negotiations with Conservative coalition partners over his plan for what he termed a “workers' bonus”, lifting all earnings under £10,500 out of income tax, which he wants to see introduced in next year's Budget.

But Mr Clegg's proposal for an increase in the basic-rate income tax threshold - worth £100 a year to low and middle-income workers - faces competition from right-wing Tory MPs, who are calling on Chancellor George Osborne to target any tax cuts which he can afford on the middle class.

The Free Enterprise Group of MPs is proposing a £15.79 billion package of tax cuts, including scrapping stamp duty on house sales up to £500,000, raising the earnings threshold for higher-rate income tax to £50,000 a year and freezing business rates for three years.

At his monthly press conference in Whitehall, Mr Clegg blamed Conservative “prejudice” for holding back proposals to increase taxes on high-value property - such as the Liberal Democrat's favoured “mansion tax” of 1 per cent on the value of homes worth £2 million or more.

Mr Clegg insisted that any changes in capital gains tax should not be seen as a “surrogate” for the mansion tax, which is now also backed by Labour but has been blocked by Conservative members of the coalition.

And he indicated that Lib Dems would be ready to consider alternative methods of shifting the burden of tax away from earnings and on to wealth, such as the introduction of new higher-rate bands of council tax to cover more expensive properties. Under current rules, all properties in England valued at more than £320,000 are placed in the same band.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: UX Consultant

£35000 - £45000 per annum: Recruitment Genius: You will be working with a 8 st...

Recruitment Genius: Part-time Editor

£8000 - £12000 per annum: Recruitment Genius: A unique opportunity has arisen ...

Recruitment Genius: Field Sales Executive

Negotiable: Recruitment Genius: An exceptional opportunity has arisen for a pa...

Recruitment Genius: Kitchen and Bathroom Installers

£18000 - £20000 per annum: Recruitment Genius: This provider of designer kitch...

Day In a Page

Orthorexia nervosa: How becoming obsessed with healthy eating can lead to malnutrition

Orthorexia nervosa

How becoming obsessed with healthy eating can lead to malnutrition
Lady Chatterley is not obscene, says TV director

Lady Chatterley’s Lover

Director Jed Mercurio on why DH Lawrence's novel 'is not an obscene story'
Farmers in tropical forests are training ants to kill off bigger pests

Set a pest to catch a pest

Farmers in tropical forests are training ants to kill off bigger pests
Mexico: A culture that celebrates darkness as an essential part of life

The dark side of Mexico

A culture that celebrates darkness as an essential part of life
Being sexually assaulted was not your fault, Chrissie Hynde. Don't tell other victims it was theirs

Being sexually assaulted was not your fault, Chrissie Hynde

Please don't tell other victims it was theirs
A nap a day could save your life - and here's why

A nap a day could save your life

A midday nap is 'associated with reduced blood pressure'
If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

If men are so obsessed by sex...

...why do they clam up when confronted with the grisly realities?
The comedy titans of Avalon on their attempt to save BBC3

Jon Thoday and Richard Allen-Turner

The comedy titans of Avalon on their attempt to save BBC3
The bathing machine is back... but with a difference

Rolling in the deep

The bathing machine is back but with a difference
Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

Conservatives plot a motoring revolution

Draft report reveals biggest reform to regulations since driving test introduced in 1935
The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border