The 2013 Autumn Statement did not bring many surprises. The one announcement that was widely predicted, the introduction of capital gains tax (CGT) on foreign owners selling residential property in the UK, was included as anticipated. Whilst the actual rate has not yet been announced, it is likely to be 18% or 28% depending on the amount of the gain to match the rate applicable to residents in the UK. Thankfully this new tax will be assessed from the point of the tax’s introduction or the date of the property purchase, whichever is the latter. Furthermore, the tax will not be introduced for a further 18 months to allow for a full consultation.
The Treasury has already acknowledged that the new tax will not raise much revenue but it is designed to make the tax system fairer. CGT is currently liable on second homes owned by UK residents but not on homes owned by foreign residents. The move is also intended to cool a housing maket that some fear is in danger of overheating.
Vidhur Mehra of Benham & Reeves Estate Agents comments, “There is still a consultation process to be undertaken which means the actual format of the legislation may be very different to what is actually suggested. When new taxation rules have previously been announced, their eventual introduction saw a number of exemptions meaning buy-tolet investors were exempt. We anticipate that with this new CGT, the details will prove to be important. However, it does seem that it will only be applicable to future gains and we firmly believe that even if it does affect all overseas investors, it will not dampen their appetite for London property. A tax on gain is just that; the majority of the gain still goes to the investor.”
By Vidhur Mehra, Finance Director
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