Capital Gains Tax review and effect on your strategy

[ayns]

So looks like the ball has started rolling on the expected tax grab needed to pay for this pandemic mess. Sunak has clearly voiced property transactions as an area that escapes CGT when compared against income tax brackets. He has clearly called our second home owners.

Now in my view this is going to massively effect the plans of those that are coming towards their investment journey / looking to sell up.

For those who are planning on being in the market for the next 20years and potentially beyond - is it fair to say that you shouldn’t base your long term investment decisions based on today’s CGT rules as surely these will change and evolve over time anyway?

 

 

[david slater]

Its an Office of Tax Simplification review making its report at this stage so too early to make an informed decision on what will happen. It wouldn't be a choice the government could take lightly as it would risk turning traditional conservative supporters against them. That said these are unusual times. One to watch but I wouldn't do anything rash like sell everything just yet.

[Julia Urquhart]

I think it is inevitable that the CGT will go up - second home owners already pay a higher rate than sellers of other assets and people who don't own any homes will not be at all concerned about this tax on 'the wealthy' so it will cost the Govt less in popularity than other measures.

The problem is that the Govt have raised costs and taxes incurred by LLs so much that soon it will just not be worth being a LL.

As Ayns says, maybe less of a problem for younger LLs, but as an older LL I am certainly I am planning an exit strategy - CGT or IHT? Just not both.

The problem for younger LLs is that I just don't see any of these tax rises being reversed and with ever more burdens being put on LLs the level of profitability is being severely curtailed. I really don't see my kids being LLs - it is just not worth it  

[haf1963]

Its pretty clear that the BTL market is increasingly going full commercial with major companies getting involved and the 'casual' landlords are  struggling to see it a worthwhile investment. There is still a place fo private LL's and many will make it work but I dexpect the total number of private investors to reduce over the year with most going professional/Ltd. The equation of pension versus property is tilting towards pension for many HRT payers as a 'no hassle' and 'free govt money' way of investing

[ayns]

On 11/13/2020 at 7:58 AM, julia urquhart said:

I think it is inevitable that the CGT will go up - second home owners already pay a higher rate than sellers of other assets and people who don't own any homes will not be at all concerned about this tax on 'the wealthy' so it will cost the Govt less in popularity than other measures.

The problem is that the Govt have raised costs and taxes incurred by LLs so much that soon it will just not be worth being a LL.

As Ayns says, maybe less of a problem for younger LLs, but as an older LL I am certainly I am planning an exit strategy - CGT or IHT? Just not both.

The problem for younger LLs is that I just don't see any of these tax rises being reversed and with ever more burdens being put on LLs the level of profitability is being severely curtailed. I really don't see my kids being LLs - it is just not worth it  

I guess being a LL it all comes down to want you want / need from it. If it’s sole income or supplementing your income now it’s going to get tighter.  I’m running a yield focused model where I can pump most of that return into additional investments. I have a full time job and am a higher tax payer, but my wife isn’t so based on my numbers and her pt income we can be netting £2k per month and still sit within the lower tax bracket. It’s to increase my retirement pot for the future. Even if the properties I owned didn’t go up in value at all over the 20 years until retirement, its fine and id take the income and recycling into stocks and shares as a win . If they do then I’ll pay the tax due on those “extra earnings”. It’s going to hammer people that had the sale of investment property built into their retirement plans if extra tax them becomes due. 
 

Even when I have been super pessimistic and costed right down , it’s hard to find a match investment wise that is so liked to government drivers inc inflation, land values etc as property is. We are a nation obsessed by houses and that isn’t going to change. Especially an investment where you can 100% invest using only 25% your own cash. Then one where you can recycle that money into other investment options as well to get an extra 5-10% potentially in stocks / shares.  
 

Obviously if anyone has any better ideas be sure to let me know! 

[the_secret_landlord]

Tax changes come and go and you adapt.

I remember when they got rid of taper relief, changed the CGT laws (there was once a loophole where you could sell up and move abroad for 5 years and pay zero), increased CGT from 10% to 28%, not to mention all the S24 stuff!

Like any business, the environment changes and you have to decide if you want to move with it or get out.

[Guest]

Hello haf1963, I’m new to limited company SPV for buy to let’s, and new to property hub. I noticed you’d commented on another post mentioning you used a broker in Scotland to secure lending as a limited company whereby the broker was paid from the lender rather than a fee from yourself. I have looked everywhere for this type of broker but so far have only been quoted around £1000 for broker fees.

would you mind terribly sharing your broker details with me perhaps via PM (if I can access PM as a new member?)

many thanks in advance.

[ayns]

On 11/13/2020 at 7:58 AM, julia urquhart said:

I think it is inevitable that the CGT will go up - second home owners already pay a higher rate than sellers of other assets and people who don't own any homes will not be at all concerned about this tax on 'the wealthy' so it will cost the Govt less in popularity than other measures.

The problem is that the Govt have raised costs and taxes incurred by LLs so much that soon it will just not be worth being a LL.

As Ayns says, maybe less of a problem for younger LLs, but as an older LL I am certainly I am planning an exit strategy - CGT or IHT? Just not both.

The problem for younger LLs is that I just don't see any of these tax rises being reversed and with ever more burdens being put on LLs the level of profitability is being severely curtailed. I really don't see my kids being LLs - it is just not worth it  

Just recapping on this old thread now my knee jerk reaction to the speculation on cgt has calmed down.

 

My view is unchanged from a few months back really.  Holding an asset like property will always be worth it , but is holding a handful of properties going to change your life short term maybe not, but it can improve / add value to what you already have and your future financial planning in my eyes still. Even if you are getting a 3% yield (low) , plus a bit of inflation, plus you’ve bought in a city with steady capital growth say 2%, your still looking an an annual return of +6% min on your cash worst case really. As we have said before, slice and dice that into another form of tax efficient investment and you can well over double the growth. It’s harder, but in my area (Nottingham) combination of cheap borrowing, decent yield and good investment in the area leading to future growth means I’m still happy holding 4- 5 properties for the next 15 years + , on top of recycling that cash into other investments, and confident that will pay off for complimentary retirement planning.

 

 

[haf1963]

On 11/20/2020 at 9:47 PM, Guest said:

Hello haf1963, I’m new to limited company SPV for buy to let’s, and new to property hub. I noticed you’d commented on another post mentioning you used a broker in Scotland to secure lending as a limited company whereby the broker was paid from the lender rather than a fee from yourself. I have looked everywhere for this type of broker but so far have only been quoted around £1000 for broker fees.

would you mind terribly sharing your broker details with me perhaps via PM (if I can access PM as a new member?)

many thanks in advance.

Sorry for the delay but it was a company called B2B Finance