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Property News
London property investors are offloading buy-to-let properties at record levels ahead of an expected rise in capital gains tax, which could see a rise from 18 per cent to 40 per cent, with some analysts expecting the rise to reach 50%.
Those who have made gains from shares, or buy-to-let properties are now scrambling around to off-load the assets, with financial advisers selling in some cases, two out of three of the investments held by clients.
In a survey published by the financial technology company 1st Exchange, 60% of financial advisers are already planning a transition away from assets that attract capital gains tax, like investing into EIS or Enterprise Investment Scheme's, or transferring assets to your spouse or civil partner so long as you are legally married and living together there is no CGT to pay at that point. However, this transfers the legal ownership and CGT will have to be paid if and when he or she sells the assets.
Estate agents in London are experiencing an influx of 1-2 bedroom flats, purchased by investors as investments, which has in parts of north London pushed prices down.
One London property investor with over 100 residential units in his portfolio, Andrew Efstathiou said:
"I have already instructed estate agents to sell 70% of my portfolio, I have worked hard to maintain this investment and I am not happy about this government trying to claw back money from my investments."
Responding to the proposals to double Capital Gains Tax, Philip Booth, Editorial and Programme Director at the Institute of Economic Affairs said:
“The doubling of Capital Gains Tax would be a huge mistake for Britain. Over the last few decades governments have tried to free up the private rental sector of the housing market. Capital Gains Tax would arbitrarily penalise those involved in the rental market, driving out investors and pushing more people to try and buy their own home, who cannot afford to do so. The move has the potential to reduce access to affordable housing and drive up rents.”
“Capital Gains Tax is severely counterproductive for a number of other reasons as well. It further penalises companies that finance themselves through equity rather than debt and generally represents a "double tax" on holders of shares. Surely we have learned from the financial crash that we should not be artificially encouraging companies to take on more debt.”
“All this comes not long after a point when Britain’s savings reached an all time low. We should be desperately concerned about this decision. It shows a grave error of judgement on the part of the coalition.”The emergency Budget which is planned for next month is seeking to make £6 billion in public spending cuts, and is likely to raise the level of VAT.
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