Private individuals with large investments could be heavily stung by the proposed alterations to the rate of Capital Gains Tax. The coalition government’s plan to raise the current fixed level from 18 per cent to a figure closer to the top rate of income tax could bring the rate up to 40, or even 50 per cent in the near future.
In the light of this announcement, great care needs to be taken, particularly by private investors with investments over and above £1 million.
Graham Bowcock, Head of Property Asset Management with leading chartered surveyors groups Berry says investors considering disposing of their estate in the next five years or so, should think about bringing the decision forward.
“It could be a good time to do it now. As there is no guarantee of exactly how far CGT will rise after April 2011, it might be worthwhile taking advantage of the current 18 per cent rate,” he said.
Investors in houses to let, farmland and private estates are most likely to be affected.
“Investors who were hoping to use these investments to see them through retirement will need to redo their calculations. Although they will have taken capital gains tax into account, the proposed huge increase mean that they will be worse off than anticipated. This is another reason to consider the possibility of selling before the new rates begin but it is important to weigh up the benefits of the rental income versus the hefty portion of the sum which will be claimed by the taxman,” he explained.
This CGT change could mean a boost to the housing market through the flurry of property which will be brought on to pre-empt the rate increase. A second factor which could further enhance this boost is the abolishment of Home Information Packs (HIPs). Communities Secretary Eric Pickles and Housing Minister Grant Shapps have announced an immediate suspension of the requirement for homeowners to provide a Home Information Pack when selling their home. This action was taken swiftly to avoid uncertainty and to prevent a slump in the already delicate housing market, hopefully sending a message of encouragement to homeowners thinking of selling their property.
“This change will facilitate a smoother, and less troublesome selling process. HIPs were seen to be holding back the movement of property, as sellers had to hand over extra cash in advance in order to legally list their home as ‘For Sale’,” Graham said.
“This suspension will reduce costs, remove some unnecessary regulations from the house sale minefield and provide much needed assistance to the property market during the economic recovery. Over the next 10 years, it is likely to save £870 million, giving sellers more money to spend in the wider economy.”
Tied into the HIPs were the Energy Performance Certificates and these will continue to be a legal requirement for properties being sold or let. For assistance with CGT, HIPs, EPCs or any other issues to do with selling or letting your property contact your local Berrys office or phone Graham Bowcock on 01606 49200, email graham.bowcock@berrybros.com or visit www.berrybros.com
