GOOD NEWS FOR PROPERTY INVESTORS

The Chancellor’s draft legislation to reform Capital Gains Tax announced last week will be welcome news for small businesses as well as property investors, according to chartered accountant and expert property investor and Rod Thomas FCA of Axis Property Investment Ltd...

Mr Thomas believes there are many property investors who would like to sell selected properties, but have chosen not to because of high Capital Gains Tax (CGT).

However, now the new lower rate of 18% will encourage many investors to take a more flexible approach to developing their portfolio, selling underperforming assets in order to reinvest in potentially better performing property, without being faced with a large tax bill.

“The CGT trap has effectively forced some property investors to keep hold of properties longer than they originally intended. The current CGT rate of up to 40% has meant that investors who have re-mortgaged to buy more properties can not afford to sell because they will be unable to clear the mortgage and pay the tax.

“The new 18% rate confirmed last week will enable landlords to sell, which in turn will help to increase the supply of property in the market. This can only be good news for first time buyers.”

The new rate, which will come into force on the 6 April, will make property investment one of the most tax efficient investment vehicles in the UK, especially if a property is bought by a couple and sold with each using their CGT allowance of £9,200, and all tax deductions are maximised during the ownership of the property. 

Mr Thomas continued: “This change in legislation will help to put the UK more in line with other European countries and in fact I believe the amount of funds raised by CGT will actually increase because the need to delay paying the tax will no longer be such an issue for individuals.”

Second home owners will also benefit from this change in legislation. David Lawrenson of Lettingfocus.com who will also be holding several seminars at the show believes that this new lower rate could even see an increase in the number of second home buyers especially in rural and coastal areas, but also in city centres as people look for a week day pied a terre.

Lawrenson commented: “This new flat CGT rate will be a reduction for most people and will act as a big boost to prices in both the buy-to-let and the second homes market. At the moment, everyone is focusing on the impact of the credit crunch but property investment is still attractive to investors and this change to the CGT rate will only help to relight interest in the buy-to-let market, which will help keep property prices high.”