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Labour capital gains tax warning: experts say sell this asset before Starmer hikes CGT

Capital gains tax (CGT) is often described as the “forgotten tax” but the Treasury knows exactly important it is. HMRC collected £15.4 billion worth of CGT in the 2023/24 tax year, more than double the revenues generated by inheritance tax, which generates a lot more fuss.

The CGT bill may continue to climb as chancellor Jeremy Hunt has made the tax more punitive in a bid to rise funds.

He has now slashed the annual exempt amount for two years running, to just £3,000. It used to be £12,300.

CGT could become an even bigger worry after the next election as an incoming Labour government may tighten the CGT net.

Last year, shadow chancellor Rachel Reeves had ‘no plans’ to increase CGT rates. Shortly after, deputy leader Angela Rayner said Labour may include a commitment to hike CGT its election manifesto. This is still up for grabs.

Andrew Tricker, director at Lubbock Fine Wealth Management, says that anyone who is sitting on a potential capital gain should consider making use of today’s allowances in case they disappear after the election.

Jeremy Hunt has been tinkering with CGT rates, so it wouldn’t be a surprise to see Rachel Reeves build on his work.

Anyone who’s thinking of selling a profitable asset may want to act sooner rather than later, when they could pay a lot more CGT.

CGT is charged on profits when selling assets such as antiques, jewellery, cryptocurrency, stocks and shares held outside of the tax-free Isa wrapper, or a business. 

Tax is not charged on the full sale price but the increase in value since you bought the asset. In some cases, you may be able to deduct certain costs.

Although your main home is exempt under private residence relief, CGT is imposed on sales of second homes and investment properties.

Unlike inheritance tax, CGT is not charged at a set rate. How much you pay depends on the asset you are selling, and your income tax bracket.

Basic rate taxpayers pay CGT at 10 percent which rises to 18 percent on property sales, while higher rate and additional rate taxpayers pay 20 percent or 24 percent respectively.

Last year, higher rate taxpayers paid CGT at an even higher rate of 28 percent when selling a second home or buy-to-let.

Hunt cut that to today’s 24 percent rate from April 6, claiming this would encourage sales, free up former rental homes for buyers and boost transactions and total tax revenues.

Trickier said a four percentage point CGT reduction is a substantial saving for sellers, worth £4,000 on a £100,000 profit.

The cut was criticised at the time by the Labour Party, which suggests it may quickly could reverse it if it wins this year’s election. “That saving may have a short shelf-life,” Trickier said.

Hunt also abolished the furnished holiday lettings regime in March, in a blow for holiday homeowners. This currently allows owners to sell properties at a lower CGT rate of 10 percent.

They will pay the normal CGT rate on property disposals from April 2025.

Trickier urged potential vendors to make use of today’s reduced CGT rates on buy-to-let properties and holiday homes.

There is a danger that Labour could hike CGT rates dramatically to bring them in line with income tax, which would see higher rate taxpayers pay 40 percent on property sales, while additional rate taxpayers would pay an even more punitive 45 percent. “Higher rate taxpayers looking to sell a property in the near future should consider acting ahead of the election,” Trickier said.

An incoming Labour government could even scrap the £3,000 annual exempt amount altogether, so consider using that, too, Trickier said.

Every property investor must understand the changes to avoid paying more CGT than necessary, said Ben Alcock, chartered financial planner at Continuum.

They also need to pay tax in time. “Taxpayers must report and pay CGT within 60 days of the completion date for sales of rental properties and second homes.”

Those who are registered for self-assessment can declare the gain on their tax return. Others can use the HMRC’s ‘real time’ Capital Gains Tax Service. They can do this online at Gov.uk after setting up a Government Gateway user ID and password.

Property sellers can deduct certain costs including stamp duty, estate agency and solicitors fees, and any improvements that add value such as an extension (but not everyday maintenance costs like decorating).

Alcock suggests seeking financial help to work out what you owe. “A good adviser can also find solutions to minimise your actual liability, for example by looking at losses you might have made in previous years.”

It may be worth seeking help before the election, rather than afterwards when your options for saving tax may be limited.


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