Figures recently published indicate that the Treasury have received a record £9.2bn in receipts of capital gains tax (CGT) in 2018.19, an increase of 18% from the year before. Some commentators believe at least some of this increase has arisen from increasing returns from landlords who are giving up their buy to let properties in the wake of recent tax changes. Now that tax relief on mortgages on buy to let properties is restricted to 20% the rate of return for taxpayers borrowing to fund the purchase of the property has fallen (both higher rate and otherwise basic rate taxpayers because of the way the rules operate).
From 6 April 2020 any capital gains tax due on the sale of a property will be payable 30 days after disposal, which will bring the tax take forward for HMRC in the future. The rate of tax is currently 18% or 28% (dependent on income) on the gain arising from sales of property, compared to 10% and 20% for other types of gains.
The government has also proposed that from 6 April 2020 the lettings relief available to landlords who used to live in a property before subsequently letting it out is to be restricted, so that it only applies in a very few circumstances. For these types of landlords it would be worth considering selling the property in 2019.20 to avoid losing the relief.
With other changes not directly related to tax, such as a stop on tenants being charged by agents and landlords for fees during the letting process, minimum epc requirements, and measures proposed to stop landlords ‘evicting tenants without good reason’ some landlords may be thinking there are easier ways to get a return on investment …HMRC will collect the increasing CGT as properties are sold on.
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