Landlords and second-home owners could face higher capital gains tax bills under options reportedly being considered by the Government ahead of next month’s Budget.
The Telegraph reports Prime Minister Andy Burnham is considering changes to capital gains tax as the Government looks for ways to strengthen the public finances.
One option would involve bringing CGT rates closer to income tax rates, potentially increasing the tax charged when landlords sell investment properties.
However, no change has been announced and the final measures will not be known until Chancellor John Healey delivers the Budget on 28 October.
LANDLORD SALES
CGT is currently charged on gains from residential property at 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers.
Increasing those rates could therefore significantly increase the tax bill facing individual landlords disposing of properties.
The Telegraph reports that reforms to CGT could potentially raise around £14bn, although estimates of the revenue generated by higher rates are contested.
Critics of higher CGT argue that increasing rates could discourage asset sales, reducing the amount ultimately collected by the Treasury.
BUDGET SPECULATION
Separate reports in recent days have also identified CGT as one of the tax changes being considered ahead of the Budget.
The Government has committed to maintaining its fiscal rules while Burnham has acknowledged the challenging state of the public finances.
The latest speculation comes as landlords already face a changing tax and regulatory environment and follows reports that the Government is considering lowering the threshold for the High Value Council Tax Surcharge on expensive homes.
Any changes to CGT, including the rates applying to residential property, will depend on decisions taken by the Chancellor ahead of the Budget.
