Solicitors urge property investors to hold steady amid possible CGT hike

Solicitors urge property investors to hold steady amid possible CGT hike



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A leading law firm that specialises in property management is warning people not to rush into selling property investments in fear of the proposed Capital Gains Tax rise.  

Moore Blatch solicitors are urging their clients not to sell off parts of their portfolios over the next 12 months, (unless they were already planning to do so), as they believe the current monthly growth in the market place will compensate for any proposed CGT increase.

 

The Liberal Democrats’ controversial proposal to raise CGT from the current 18% to 40% - or even 50% - has given many a property investor cause for concern.

 

Moreover, the uncertainly over when exactly the raise will take effect – whether it will be part of the emergency budget, put into place immediately, back dated to the end of the last financial year or set for the next financial year – has sparked widespread speculation and panic.

 

However, Moore Blatch’s analysis of the current trend in property prices has left them confident that, even if CGT increases from 18% to 40%, most landlords would be better off holding onto their property.

 

According to Blatch, Land Registry statistics show a 7.5% 12 month rise in property prices, and assuming this trend continues, investors could be financially worse off if they sold now compared to in a year’s time, despite the fact that the tax rate is more than doubling.

 

However, they also advise anyone looking at tax planning with regards to properties held for retirement planning or inheritance purposes to consider putting them into a trust structure, as this could remove all capital gains issues.

 

David Charlesworth, head of Wealth Management at Moore Blatch said: “Anybody that is running property within a business should seek tax advice as there are likely to be tax changes that need consideration such as business property relief, agricultural property relief, using IHT and trusts for estate planning.

 

“However, we would advise against making hasty decisions especially with regards to any CGT rises as the capital appreciation is likely to outweigh any increased tax liability.”

 

Other measures put forward by the Liberal Democrats include lowering the CGT tax threshold to £1,000 – a move described as “daylight robbery” by one IFA. 

 

However, James Hyman, Partner for Residential Sales at Cluttons, believes the rise could be beneficial to the market, he said: “The forecast 22% uplift in capital gains tax to 40% could give the London market the supply it has been crying out for over the last 18 months. Many second homeowners and investors will see that this as an opportunity to come out of the market for the short term.

 

“Even if they were to hold onto the properties for any increase in value over the next 3 or 4 years, this increase is unlikely to surpass the rise in what they will have to repay to the treasury in tax.

 

“The increase in stock will be greatly appreciated in Central London and will help address the desperate need for property for sale within certain parts of the capital.”

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