Goodbye Buy to Let... Cooper Parry comments 
Added : 8th July 2008
If you would like to discuss this article, please email mikeb@cooperparry.com
Most of the headlines surrounding Alistair Darling’s Budget were concerned with the unpopular removal of the 10% rate of income tax. The Budget did, however, include a generous reduction in the rate of capital gains tax (CGT) on the sale of investment assets. Gains on the disposal of investment properties are now subject to tax at just 18% - effectively the lowest rate at any point in the last ten years.
Mike Brown, Senior Tax Manager at Regional Business Advisers Cooper Parry says "Some commentators believe this reduction is likely to be temporary. Buy to let landlords would therefore be well advised to consider selling properties whilst this favourable rate of taxation remains available and before the full effects of the forecast property crash start to bite."
The rate of capital gains tax on the disposal of investment properties previously ranged between 24% and 40% depending upon the length of time for which the property had been held.
The 2008 Budget simplified these rules considerably by replacing them with a flat rate to taxation of 18%. Mike warns that this simplification will make it easy for the Chancellor to raise the rate of capital gains tax in future Budgets. He commented that "such increases may be likely if questions are asked about how the reduction in tax revenue is to be subsidised. Given the furore over the abolition of the 10% rate of income tax, the Chancellor may need to consider who benefits from the reduction in the rate of capital gains tax and whether he has been over generous. The removal of a lot of the old complex rules governing CGT will make it easy for him to implement any future increases in the rate of taxation."
With the prospect of a possible crash in the housing market the values of many investment properties are looking precarious. Mike says "It might be advisable for concerned landlords to sell their properties now before prices tumble and the rate of taxation returns to its previous levels."
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