Capital Gains Tax: Preparing for Potential Changes in the Autumn Budget

Let’s talk Capital Gains Tax….

Because, quite frankly, everyone else is.

We’re currently representing the owners of an incredible super-prime property, soon to be coming on the market in excess of £20m.

Having been in the family for 40 years, there is a genuine concern that they are facing a huge bill if the new Labour Government double the CGT rate in the upcoming Autumn budget as is widely anticipated.

If they do decide to align CGT rates with income tax rates, particularly for higher and additional-rate taxpayers, this could mean an increase from the current 20% figure to as much as 40% or 45%, depending on their income bracket.

Some property owners may rush to sell assets before the rate increase takes effect – to lock in gains at the lower tax rate. This could lead to a short-term surge in sales, potentially affecting stock prices, property markets, and other capital assets.

Having taken advice from the peerless Denny Carr at Honey Barratt, it is clear that the critical point in all of this will be the CGT Trigger Point for the sale of UK residential properties, which are not the main home.

>> For CGT purposes, the key date to be aware of is the exchange of contracts, not the completion date. This is when the beneficial ownership of the property transfers, and it’s the point at which the CGT liability is triggered.

>> The CGT reporting and payment for residential properties must be completed within 60 days of the property’s completion date.

>> Any sale subject to conditions, such as planning permission, will only trigger CGT once the condition is fulfilled.

>> For people who are registered for self-assessment, they must also include the gain in their next self-assessment tax return, in addition to the 60-day reporting requirement.

Timing really will be of the essence. And many nerves will be frayed in the process.

Ultimately – while the intention behind raising CGT may be to boost revenue and promote fairness, it could lead to unintended economic consequences. The UK may become a less attractive destination for international investors. Wealthy individuals or businesses may also relocate their capital or operations to jurisdictions with more favourable tax regimes, leading to capital outflows from the UK and lower long-term tax revenues.

The next few months are certainly going to be interesting. As ever, learning from others gives us confidence and clarity. So please do share your thoughts to help us all be as prepared as possible.