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03 Mar 2008
Cutting capital gains tax on second homes will worsen the housing crisis in the countryside, the Prime Minister’s adviser on rural affairs warned today.
Stuart Burgess, the Government’s Rural Advocate, told the Times he believes the Chancellor Gordon Brown should cancel the CGT reduction which is due to come into force next month.
He says the move will cause a frenzy of speculation as owners of second homes – many of them MPs – will rush to capitalise on the cut, making it even more difficult for first-time buyers and young families to get on the property ladder.
The move for lower taxes is curious, says the Times, as a separate review is examining whether councils in beauty spots should be able to prevent houses being sold as second or holiday homes.
If the tax cut goes ahead, second-home owners will pay just 18% on the sale of their homes instead of the standard 40% rate.
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Not a Tax Cut for all
A second home owned for 11 or more years currently qualifies for taper relief of 40%. In many cases & especially likely if jointly owned, the taxable part of the gain will only be taxed at 20% less 40% = 12%. Only 40% tax payers will benefit from the proposed 18% CGT flat rate & ending of taper relief.
It is therefore wrong to imply the chancellor's proposal amounts to a tax cut for all. For many people it will mean an increase in CGT, because due to the removal of taper relief many 2nd home owners will now have to pay 18% CGT instead of 12% previously upon selling their 2nd home.
Posted by: robin pearce, 04 Mar 2008 | 00:00