Capital gains tax - the problem

wonderboysam

33% is ridiculous and counter productive, there's no point in selling from a landlords point of view. If one does decide to sell they're going to jack up the price to cover some of the tax :mad:

I think if it was property would be bought and sold at a much higher rate, I read that they made more off the tax when it was previously at 20% albeit in the boom days

seamus

You can only get what the property is worth. They can't "jack up the price" unless someone is willing to pay it.

The 33% is only payable on profit, and anyone who's in any way smart will engineer their accounting to minimise their end profit.

Personally I'd be in favour of a regressive CGT regime for property that heavily discourages speculation. That is, a punitive CGT of 50%+ which reduces the longer you've owned the asset, down to ~20% or so after 20 years of ownership.

Lux23

wonderboysam wrote: »

33% is ridiculous and counter productive, there's no point in selling from a landlords point of view. If one does decide to sell they're going to jack up the price to cover some of the tax :mad:

Do you understand how percentages work?

wonderboysam

seamus wrote: »

You can only get what the property is worth. They can't "jack up the price" unless someone is willing to pay it.

Obviously yes, but seeing as there is a higher demand than supply - partly due to high CGT, prices are universally jacked up, there isn't much incentive for a landlord to stop leasing and sell their property handing over 33% of the profits. If the tax was lowered there would be a bigger supply which would bring prices down.

Personally I think a solution to the current crisis would be to temporarily lower CGT to 10% for 2018 stating that it will increase to 20% the following year - this would see a big increase of houses for sale at a competitive price

amcalester

wonderboysam wrote: »

Obviously yes, but seeing as there is a higher demand than supply - partly due to high CGT, prices are universally jacked up, there isn't much incentive for a landlord to stop leasing and sell their property handing over 33% of the profits. If the tax was lowered there would be a bigger supply which would bring prices down.

Personally I think a solution to the current crisis would be to temporarily lower CGT to 10% for 2018 stating that it will increase to 20% the following year - this would see a big increase of houses for sale at a reasonable price

Lowering CGT won't increase the supply of houses but it may decrease the supply of rental properties.

And remember, the government don't want houses for sale at a reasonable price thatd cost them too many votes.

seamus

wonderboysam wrote: »

Obviously yes, but seeing as there is a higher demand than supply - partly due to high CGT, prices are universally jacked up, there isn't much incentive for a landlord to stop leasing and sell their property handing over 33% of the profits. If the tax was lowered there would be a bigger supply which would bring prices down.

Personally I think a solution to the current crisis would be to temporarily lower CGT to 10% for 2018 stating that it will increase to 20% the following year - this would see a big increase of houses for sale at a competitive price

I'm not sure how you see this as being a solution to the current crisis. It's a supply problem.

If landlords dump rental properties onto the residential market, then rental prices shoot up as rental properties become unavailable. Which potentially puts even more pressure on buyers - sick of increasing rents, people move back in with parents and start looking at buying.

The buying & letting markets don't operate independently, they are fundamentally intertwined. As a result you cannot force stock from one to resolve problems in the other.

The only solution is getting vacant properties onto the market and getting new properties into the market.

Browney7

wonderboysam wrote: »

33% is ridiculous and counter productive, there's no point in selling from a landlords point of view. If one does decide to sell they're going to jack up the price to cover some of the tax :mad:

I think if it was property would be bought and sold at a much higher rate, I read that they made more off the tax when it was previously at 20% albeit in the boom days

Just on landlords that own residential property or are you in favour for shares and other investments also?

Graham

wonderboysam wrote: »

Personally I think a solution to the current crisis would be to temporarily lower CGT to 10% for 2018 stating that it will increase to 20% the following year

Law of unintended consequences would suggest this would result in lots of tenancies ending suddenly while landlords availed of the limited opportunity to cash-out at beneficial CGT rates.

wonderboysam wrote: »

this would see a big increase of houses for sale at a competitive price

Would volumes be sufficient to reduce asking prices?
Would number of properties available increase significantly?

If volumes were sufficient to reduce asking prices, you'd probably upset quite a few people who have just managed to get out of negative equity territory.

Lumen

wonderboysam wrote: »

Personally I think a solution to the current crisis would be to temporarily lower CGT to 10% for 2018 stating that it will increase to 20% the following year - this would see a big increase of houses for sale at a competitive price

And by a massive coincidence this happens to be the thing that would make you money. :pac:

myshirt

A cold hard analysis would dictate that we tax the bollix out of gains on land and property. If it were me I'd remove the PPR exemption, I'd raise LPT, and I'd drop CAT thresholds, especially getting rid of Agricultural Relief.