- Chancellor did not increase CGT in line with income tax, as expected
- Experts say the decision prevented an ‘avalanche’ away from the sector
- The time limit for paying tax at the time of sale of property was also doubled to 60 days
- Landlords said it was challenging to make timely payments in a busy property market
Portfolio buy-to-let landlords heaved a sigh of relief as Chancellor Rishi Sunak decided not to increase capital gains tax in today’s budget.
There was concern in the sector that the tax hike, which was rumored in the days and weeks leading up to today’s speech, would prove to be a turning point for landlords and prompt them to sell their portfolios.
This, he said, will further reduce available rental homes, which is already in a low rental market.
Landlords have increased the tax and have been given more time to pay the CGT bill
Richard Davies, head of lettings at Chestertons, a London estate agent, said: ‘The tax increase could have presented the final tipping point for landlords to sell their portfolios.
‘The avalanche effect of this would mean a subsequent reduction in rental properties during a time when UK tenants already face a lack of suitable homes within their budgets.’
In a move welcomed by the sector, the Chancellor also relaxed the time limit in which they must pay tax after selling an investment property or second home.
Whereas earlier the bill should have been paid within 30 days – a change that was introduced only last year – that time limit has now been doubled to 60 days.
Angus Stewart, chief executive of Property Master’s online buy-to-let mortgage broker, said: ‘More time to report and pay capital gains tax on properties they sell would be welcomed by landlords.
‘I suspect that this comes from more than just the operational challenges of complying with these new rules that came into force last year.
Capital Gains Tax: What Is It and Who Pays?
People pay capital gains tax when they dispose of property that is not their main home, as well as on their main home if they have rented it out, used it as a business or if it is very large. Is.
They also pay it on shares that are not in Isa or Pep, excluding cars, business property and personal assets of £6,000 or more.
However, they will only have to pay tax on profit over and above the tax-free allowance, which is currently £12,300.
Higher or additional rate taxpayers pay 28 percent tax on gains from residential property and 20 percent on other properties.
Basic rate taxpayers pay 18 percent on residential properties and 10 percent on other properties, unless the value of their gains moves them into the higher tax band for that year.
‘Solicitors and conveyors are dealing with a record workload, so supporting the landlords who had a very short time frame would have been a struggle.’
He further added: ‘Moreover, the budget so far appears largely neutral in the case of landlords, who have been facing pressure from the recent tax hike and now rising interest rates, this will provide relief.’
The new deadline comes into effect from today, and applies to foreign landlords as well as UK residents.
The 30-day deadline has been a problem for landlords, especially in the past year as the property market has been extremely busy and professionals like Conveyor have a long backlog of work.
This has caused some people to struggle to meet the deadline.
Dominic Agees, chief executive of estate agent Winkworth, said: ‘I think it’s a workable solution, giving landlords some relief.
“It is a sensible solution to the highly stringent payment terms for 30 days, which can be for capital gains payments on complex transactions involving payment of many different charges.
‘If it’s on the face, 30 days from completion should be enough, but there are many unforeseen circumstances where the 30-day deadline has caused issues, especially in a bullish property market where conveyors are in demand and Delays can be very common.’
Before the budget, it was estimated that Sunak may decide to bring the capital gains tax in line with income tax, meaning 20 per cent for basic rate taxpayers and 50 per cent at higher rate.
This was recommended in a report by the Tax Simplification Office.
The landlords also welcomed the change in the Universal Credit Taper Rate, which will be cut with effect from 1 December 2021.
This means recipients will see their Universal Credit at 55p instead of 63p for every pound earned from work paid in excess of their specified allowance.
He said it would help low-income tenants pay their rent – although the £20 Universal Credit per week bonus has been removed during Covid.
Ben Beadle, chief executive of the National Residential Landlords Association, said: ‘Today’s announcement is welcome news for private tenants who have struggled to afford their rents during the pandemic, despite a drop in real private rents .
‘However, this does not undo the damage that would be caused by previous decisions to freeze housing benefit rates in cash terms.’