News and Press releases

PROPERTY MATTERS

03/06/2010

Landlords have been made more aware of the impact of capital gains tax (CGT) on their property portfolios as a result of strong hints that the new Coalition government is about to substantially increase rates.
It is expected the new UK government will raise the tax, which will affect those who wish to transfer or sell property, which is not their main home, throughout the UK. The current rate of CGT is 18 per cent and in recent years this was as low as 10 per cent, presenting an opportunity for property owners to transfer their assets before any substantial increase takes place.
However David Alexander, of letting agency D J Alexander, says for many, even if they had time to sell, they couldn’t afford to do so. “Capital growth has more or less stalled over the past two and a half years, therefore anyone who bought a property four or five years ago, and chooses to sell now, may find themselves with a rather limited surplus – presuming, of course, that they can find a buyer.”
Those with the best options are investors like those who bought rental property in a prime area of Edinburgh or Glasgow ten years ago. He continued: “Since then the capital value of their asset will have grown substantially, on average, over that period, even if prices have
stalled or even fallen back slightly, since late 2007. Therefore, the most sensible route might be to dispose of the asset now rather than pay a substantially higher level of capital gains tax on a sale at some time in the future.
“Unfortunately, someone who bought rental property five years ago, and, therefore, is sitting on a much smaller profit – or even no profit at all – would be selling at the wrong time in purely market terms. As rental demand looks likely to be buoyant for some time, a better option might be to hold on to the property in the hope that the market recovers and sell at some time in the future – even if the rate of CGT is by then substantially higher than it is today.”

THE SCOTSMAN PROPERTY, 3 June 2010

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