Re Tax Cuts
The winners are clearly landlords who have owned properties for a few years whose tax liability was 40% - there could be a lot of properties coming onto the market before April 08 from lanlords trying to minimize their tax bill.
Or am I missing something?
From today's Daily Telegraph:-
What is the current rate of CGT?
At the moment the actual rate of CGT you pay is determined by your top rate of income tax. So for higher rate taxpayers you will pay 40 per cent CGT in the 2007/8 tax year and lower rate taxpayers will only pay CGT at 20 per cent. But you can also pay as little as 5 per cent depending on the assets you are disposing of.
But isn't there taper relief that reduces my CGT bill?
Yes. There is taper relief that can help you reduce your CGT bill. If your chargeable gains after allowable losses are more than the annual exempt amount for the year you can qualify for taper relief, which is calculated depending on how long the asset has been held. The longer the asset has been held the more relief you will get - after 10 years only 60 per cent of the gains are chargeable to CGT. This tapering can reduce the effective rate of CGT to 12 per cent for basic rate taxpayers and 24 per cent to higher rate taxpayers after a decade.
So what’s changing?
The current system is being scrapped from April 5, 2008. The Chancellor, Alistair Darling, has decided to move to a single rate of CGT for everyone which will be paid 18 per cent.
What is happening with the CGT exemption limit?
It is staying put. Everyone will still get a CGT allowance, which is £9,200 for the current tax-year and any gains up to the limit are tax-free. The limit is likely to be increased next year.
I own a second home. Does that mean I will pay less tax when I sell-up?
Yes. You will are likely to be a winner with the new system. At the moment the minimum CGT you will pay on the chargeable gain is 24 per cent, but it could be more depending on how long you have owned the property – if you have been a landlord for less than three years you face a CGT bill paid at 40 per cent. From next April you will only pay 18 per cent – irrespective of how long you have owned your property. However, if you are a basic rate tax payer you may pay more. For example, a basic rate taxpayer who has held a buy-to-let property for 9 years will pay CGT at 18 per cent, rather than 13 per cent.
I own a second property but it is a holiday let? Does that make a loser or a winner when I come to sell it?
A loser I’m afraid. If you own a qualifying furnished holiday let it is a business asset and so you will pay CGT at 18 per cent, rather than the current 10 per cent as a higher rate taxpayer.
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