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Uncertainty Surrounding CGT Leads to Increase in Sales

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Buy to Let  CGT  Capital Gains Tax  Emergency Budget 

By - Wednesday 09 June 2010

So far we remain blissfully unaware as to the coalition government's plans for changes to capital gains tax (CGT) ahead of the emergency Budget later this month (June 22nd), but fears over a proposed rise are ensuring that some property investors are putting their homes on the market.

Earlier this year, the government announced that it was planning to: "Seek ways of taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities." Many assume that this will involve changing CGT to reflect an individual's income band. A change from the current rate of 18 per cent to marginal rates of 20, 40 or 50 per cent has been mooted.

According to independent London property portal Sourcing Property, the decision of the government to introduce a number of measures to the market, designed to help reduce the deficit, is likely to encourage more real estate to enter the market in the short term.

Jo Eccles, director of the company, explained that individuals with Buy to Let real estate investments may be more tempted to sell before the changes are implemented.

"We may see a period of panic selling over the next few weeks as people seek to quickly dispose of second homes and investment property before the Budget is announced," she added.

However, Ms Eccles claimed that the increase of supply to the market would be a welcome development for individuals looking to invest in property, as it would represent a move away from high competition, a climate of sealed bids and demanding vendors and it is likely to suppress price growth over the short term as it has largely been fuelled over the past 12 months by a lack of supply.

"Over the long term, it remains to be seen whether the proposed change in CGT, assuming it is introduced, will have a wider impact on the UK property market as a whole. There are concerns that it may reduce the appeal of buying UK property for investment purposes and we may see would-be buyers turning to alternative assets instead," she continued.

People are generally in agreement that, while the government needs to raise extra revenue to handle the deficit, there are concerns that by using CGT as a vehicle to raise that capital, smaller investors, landlords and second home owners could be unfairly punished.ADNFCR-3415-ID-19811125-ADNFCR

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*This page is provided for information purposes only and should not be construed as offering advice. IPIN is not licensed to give financial advice and all information provided by IPIN regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.

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