capital gains tax - will it go up?
Discussion
I am possibly about to sell a commercial property and will be paying cap gains at 18% if I do. Now a neighbour tells me there may be plans to raise it to 40% - yikes! Is this likely to happen? If so, would it need to happen in the budget, or could it be introduced overnight? And would the % paid depend on the date of exchange? I realise that a crystal ball is required here, but your educated guesses would be welcome.....
It won't go up to 40%. In fact in never was 40%.
Prior to 5 April 2008, you paid Capital Gains Tax at the highest rate of Income Tax yiou were assessed on in the year the gain arose. For some people that was indeed 40% - but for many people some of the gain was taxed at the basic rate of tax at the time (22%) with the balance at 40%. However, the gain was always arrived at after the application of either Indexation Relief or Taper Relief, which often meant that the effective rate of tax applied to the gain was a lot lower than 22%. Insome cases it was around 10%.
After 5 April 2008, Indexation and Taper relief were abolished, but the gain was taxed at a flat 18% instead. For the disposal of business assets (as opposed to straight investment assets) the Capital Gains Tax rate is 10%.
I expect that the basic rate of CGT might increase to 20%.
Prior to 5 April 2008, you paid Capital Gains Tax at the highest rate of Income Tax yiou were assessed on in the year the gain arose. For some people that was indeed 40% - but for many people some of the gain was taxed at the basic rate of tax at the time (22%) with the balance at 40%. However, the gain was always arrived at after the application of either Indexation Relief or Taper Relief, which often meant that the effective rate of tax applied to the gain was a lot lower than 22%. Insome cases it was around 10%.
After 5 April 2008, Indexation and Taper relief were abolished, but the gain was taxed at a flat 18% instead. For the disposal of business assets (as opposed to straight investment assets) the Capital Gains Tax rate is 10%.
I expect that the basic rate of CGT might increase to 20%.
Eric Mc said:
It won't go up to 40%. In fact in never was 40%.
Prior to 5 April 2008, you paid Capital Gains Tax at the highest rate of Income Tax yiou were assessed on in the year the gain arose. For some people that was indeed 40% - but for many people some of the gain was taxed at the basic rate of tax at the time (22%) with the balance at 40%. However, the gain was always arrived at after the application of either Indexation Relief or Taper Relief, which often meant that the effective rate of tax applied to the gain was a lot lower than 22%. Insome cases it was around 10%.
After 5 April 2008, Indexation and Taper relief were abolished, but the gain was taxed at a flat 18% instead. For the disposal of business assets (as opposed to straight investment assets) the Capital Gains Tax rate is 10%.
I expect that the basic rate of CGT might increase to 20%.
Thanks Eric, does that mean that an industrial unit purchased a base for my business would be taxed at 10%? That would be very good news indeed. And is the tax decided on what the rate is on the day of completion, or exchange, or when the property was put up for sale, or some other random date that I hadn't thought of?Prior to 5 April 2008, you paid Capital Gains Tax at the highest rate of Income Tax yiou were assessed on in the year the gain arose. For some people that was indeed 40% - but for many people some of the gain was taxed at the basic rate of tax at the time (22%) with the balance at 40%. However, the gain was always arrived at after the application of either Indexation Relief or Taper Relief, which often meant that the effective rate of tax applied to the gain was a lot lower than 22%. Insome cases it was around 10%.
After 5 April 2008, Indexation and Taper relief were abolished, but the gain was taxed at a flat 18% instead. For the disposal of business assets (as opposed to straight investment assets) the Capital Gains Tax rate is 10%.
I expect that the basic rate of CGT might increase to 20%.
Generally there's more to be gained by timing the sale to achieve the maximum value for the asset than there is to save in tax due to proposed rate changes. (i.e. the price of the underlying asset may have more to do with your post tax gain than the tax rate does. I.e. it's daft to rush to sell before a tax rate change if this means you'll achieve a suboptimal price for your asset.) If you can reliably estimate the gain now, or in the future, as well as know the tax rate now, and in the future, then you can plan to make the biggest post tax gain. I'm just saying don't be blinkered by changing rates - the underlying asset value is more potent in the calculation.
Eric Mc said:
GR33NIE said:
Even if it does go up I'm sure there are ways around it arn't there?
No.There are certain allowances and reliefs available which people should be aware of and which they should apply if appropriate.
Edited by GR33NIE on Friday 15th January 13:56
GR33NIE said:
Even if it does go up I'm sure there are ways around it arn't there?
Yes, leave the country.I mean capital gains generally are not without some risk, so to tax them the same as riskless income is mentally retarded. I mean whats the point of taking any risks any more? Not everyone expects a bailout. The black cloud of communism grows ever larger.
ringram said:
GR33NIE said:
Even if it does go up I'm sure there are ways around it arn't there?
Yes, leave the country.I mean capital gains generally are not without some risk, so to tax them the same as riskless income is mentally retarded. I mean whats the point of taking any risks any more? Not everyone expects a bailout. The black cloud of communism grows ever larger.
They are taxed at lower rates and, as mentioned previously, there are extra allowances and reliefs available.
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