ECONOMY
Capital gains tax warning: Rishi Sunak could hit landlords with huge bills

State borrowing halved last month as the UK economy begins to bounce back from 18 months of turmoil during the pandemic. The Government borrowed £10.4billion in July – down from £20.5billion in the same month last year, the Office for National Statistics said. Economic activity was driven up by the lifting of Covid rules, which led to a £9.5billion higher tax haul than last July.

The promising figures will boost the mood of many, but reports are suggesting that Chancellor of the Exchequer Rishi Sunak is still looking to reform various taxes to raise funds.

One area which could be looked at is capital gains tax, which is paid on your total gains each tax year.

There are two rates – basic ratepayers pay 10 percent on assets and 18 percent on property.

Higher ratepayers pay 20 percent on assets and 28 percent on property.

However, analyst as AJ Bell, Tom Selby, tells Express.co.uk that it is likely capital gains tax will be aligned with income tax.

This would mean some people paying as much as 45 percent if they were in a high tax bracket.

The expert adds that this would have a big impact on landlords or those with second properties.

Mr Selby said: “The Office for Tax Simplification’s proposals edged towards aligning the two taxes.

“The impact of that would be someone disposing of an asset would pay significantly more tax than they do at the moment.

a woman sitting at a desk: Capital gains tax news:

                                 © getty Capital gains tax news

“There would be a big impact on landlords for example, people who have second properties.

“At the moment capital gains tax is charged at 10 percent or 20 percent depending on whether you are a lower rate or higher rate taxpayer.

“If this was aligned with income tax, you would be looking at a tax rate of 20 percent, 40 percent or even 45 percent.

“So if you went down that route, anyone with significant assets or multiple properties could see a big impact on the value of their property.”

This comes as landlords in London warn they are experiencing a decrease in demand while other parts of the country see an increase.

More than one-third of landlords surveyed (39 percent) agreed that demand for homes to rent had increased in 2021’s second quarter.

But the survey of National Residential Landlords Association (NRLA) members also found more than half of central London landlords (53 percent) experienced a fall in demand in the second quarter.

Chris Norris, NRLA policy director, said: “It is clear that there is a significant flight of tenants from the capital in response to the Covid-19 pandemic.

“With lockdown restrictions having ended, and offices beginning to reopen, the jury is out as to whether this trend will continue.

“The only losers will be tenants as they struggle to find the homes to rent they need. The Chancellor needs to recognise the harm being done by tax hikes imposed on the sector.”

Source: Express.co.uk

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