Chancellor Poised to Leave Capital Gains Tax on Property Untouched

In a move that will likely come as a relief to landlords, the Chancellor is reportedly planning to keep capital gains tax (CGT) rates on second homes and buy-to-let properties unchanged in the upcoming budget. This decision is expected to alleviate concerns among property owners who had feared a financial blow from potential tax hikes. The Chancellor’s decision follows warnings that raising CGT on property sales could, paradoxically, lead to reduced revenue for the Treasury.

Focus Shifts to Capital Gains on Shares

While property owners can breathe a sigh of relief, the focus may now shift to capital gains on shares. According to a government insider, the budget is likely to target the profits from share sales instead, a source told The Times. Currently taxed at 20%, these gains could see a rise of “several percentage points” as part of the Chancellor’s efforts to bolster public finances.

Chancellor Rachel Reeves has already hinted at measures to raise up to £40 billion through a combination of tax increases and spending cuts, and investors in the stock market may find themselves bearing the brunt of these plans.

Think Tank Urges Capital Gains Tax Reform

Despite the apparent decision to leave CGT on property untouched, calls for broader reforms continue to grow. The Institute for Public Policy Research (IPPR), a prominent centre-left think tank, has published a report urging the government to overhaul CGT. The report criticizes current rates, arguing they fail to distinguish between passive asset ownership and active economic contribution.

“UK house prices have risen by around 54% since 2014,” the report notes. “An individual who held a property portfolio over that period could sell today and reap significant gains with minimal effort, yet they would face a tax bill far lower than someone earning the same amount over a decade through work.”

The IPPR suggests aligning CGT rates with income tax, proposing a 20% rate for basic taxpayers, 40% for higher earners, and 45% for the additional rate, aiming to create a fairer system while generating more revenue for public services.

Entrepreneurs Back Higher CGT on Asset Sales

In a surprising development, a group of wealthy business owners has joined the call for higher CGT rates. Entrepreneurs interviewed for the IPPR report claimed that a £14 billion boost could be achieved by increasing taxes on asset disposals. They argue that such a change would not deter investment in the UK and would help fund essential services.

Their stance challenges conventional wisdom, which typically links higher taxes on investment gains to slower economic growth. Instead, these entrepreneurs suggest factors such as access to finance and broader market conditions are more critical to fostering investment than tax rates.

Landlords React to Chancellor’s Move

John Simmons, a property investor based in Manchester, expressed relief over the Chancellor’s apparent decision to leave CGT on property unchanged. “I’ve been concerned that a tax hike would force me to reconsider my investments,” he said. “Knowing that the Chancellor might leave property taxes alone allows me to plan for the future with more certainty.”

For landlords and buy-to-let investors, the decision offers a measure of stability amid broader economic uncertainty. However, with think tanks and business leaders continuing to push for a wider overhaul of CGT, the future remains unpredictable.

Looking Ahead: Implications for the Property Market

As the government seeks to balance the need for public funding with sustained economic growth, landlords and investors will be watching closely for further developments. While property taxes may be spared this time around, the ongoing debate suggests that changes to CGT could remain on the table for future budgets.

The key question is whether future fiscal policies will revisit CGT on property and how this might impact the attractiveness of the UK’s property market in the long term.

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