Am I hearing this Right!

[TheBoatman]

It has been reported on the tv and in the press that GB intends to introduce a new tax "after" the next election, should the current lot get back in.
If I understand correctly this new tax will be applied at a 40% rate on the capital gains on all houses sold.
So, my parents who bought their 2 up 2 down house in 1970 for (say) £4K, because they live in Kent that same house is now worth (say) £150K So the capital gain would be £146K and @ 40% that means they would have to pay a staggering £58.4K tax.
Part of the sales pitch is to abolish stamp duty so that first-time buyers can get on the housing ladder, that the current tax regime is complicated and needs to be streamlined.
I've never been that great at economics but surely this would kill the housing market in one go because who the hell could afford to move? /forums/images/graemlins/confused.gif

 

[AlexL]

I have heard this too /forums/images/graemlins/mad.gif, basically there is currently a capital gains exemption on your "Prime Dwelling". The talk is that this is to be removed. HOWEVER I'm sure it cannot be retrospective, so it must relate only to any increase on the value from the day the tax is introduced? surely. As all houses are being revalued for council tax next year, this would appear to fit neatly together. As house prices are falling anyway I cannot see that this 'tax' would actually raise any money for the next few years, and indeed a fall in house price could be used to offset a capital gain elswhere - as can other capital losses. The net effect of 'sellers packs', a million new homes being dumped into an allready surplus supply market and now this will certainly cause a house price slump. As most people in the UK have the majority of net worth in their property this cannot be good for the economy as a whole.
Anyone who voted for a labour government and then is suprised when all your assets get redistributed should go and read some history! As I didn't vote for them I reakon in a true democracy, all those prats who did should pay my share of the extra tax! /forums/images/graemlins/crazy.gif

As I have been telling people for months, anyody who can read and add up can see that the chancellors spending commitments ar far in excess of his stated tax receipts, so either
a) he cannot add up
or more likely
b) he has other tax revenue streams allready sorted out, but is trying to keep them quiet until after the election.

It would be interesting to trawl back into last week and see what other little news gems got buried under the terroism legislation furore.

 

[Talbot]

This was covered in some depth in the Mail. There did not seem to be any suggestion that it was based purely on price movement from 2005 (how would you establish that baseline even with the council tax revaluation) but rather from when the house was sold last. However you would be able to set your annual Capital Gains exemption (of a generous £8k) against this - unless of course you had already used this for something else!

If this gets brought in I will be selling my house and renting/living aboard, cause I could not afford the £20k+ Capital Gains tax bill.

Its bad enough with GB as Chancellor, can you imagine what it will be like if this country is stupid enough to allow him to become PM.

 

[mikewilkes]

[ QUOTE ]
HOWEVER I'm sure it cannot be retrospective

[/ QUOTE ]

Why ever not??

His best buddy George W has just introduced a tax on Non US residents who have pension schemes in the states. Basically it is a straight 30% off the top on all your funds earnings. ( You can get around it by taking you pension over 10 years ) If you want the lot a cash lumper, tax free, as you used to be allowed then its 30% tax because of the new Patriotic Act.

<font color="purple">THIS IS RETROSPECTIVE BACK TO THE START OF YOUR PENSION PLAN </font>

Some of the guys in this company have been in the scheme for knocking on 30 years.!!!!!!!

Aparently if you live in France , Spain , Thailand or Ireland you dont have to pay. The Aussies also have an out with some complicated rulings.

 

[rickp]

Much as I dislike Grabber Gordon, I suspect the reports of removing the CGT exemption for your primary residence are pure electioneering. Mind you, if we don't complain about it, I'll bet old Grabber will take notice and stuff the measure into a budget shortly after the election.

Rick

 

[AlexL]

I was just niaively assuming it wouldn't be retrospective!
Also what about my case for example where I have renovated, rebuilt and extended a property? if he insists on applying retrospective capital gains to the day I bought it, then I can offset all the money I invested to generate alot of that gain. This would be fraught with problems and I'm sure there would be alot of people contesting the amount payable.

Last I saw (about a year ago) the tories were seriously considering axing Capital gains altoghether, as if you coldly analyse the tax reciepts it brings in a very small amount of tax in the grand scheme of things, is fiendishly difficult to understand and adminstriate and actually penalises the very section of society that should be actively encouraged to generate more wealth.

 

[jhr]

I think this is probably good old-fashioned, pre-election scaremongering. A suspicion enhanced by the fact that it emanated from the Daily Mail, that well known hotbed of left-wing radicalism.

It would be electoral suicide to propose a tax like this. Whatever you may think of Gordon Brown, he isn't stupid.

 

[capricorn]

Scary !

Amongst other things it would create an enormous barrier to the geographical mobility of labour (with a small L!), imposing an unbearable burden on someone moving to a comparable valued property elsewhere in the country to take up a new job.

The Daily Mail should be viewed with extreme caution at the best of times, particularly so 2 months before a GE. That said I wouldn't be surprised to see some watered down version of this tax in the next 5 years.

 

[Das_Boot]

Where did you hear this on the BBC?

 

[AlexL]

I said In my origonal post that I couldn't see how this would actually generate any revenue However I have heard this from more than one source -like you I view anything in the mail with healthy sceptisism! however the story does seem to have some legs. I suspect that someone is getting their wires crossed somewhere, or taking 2+2 and making 5. There does seem to be some rumblings about a new form of property or land tax, along with suspected increases in stamp duty and known rebanding of council tax, maybe its a leap of logic too far from this lot.

 

[Captain_Chaos]

It would be dangerous to assume that this government will not back date a change in legislation however inequitable it may appear.

The action they have taken to deal with people who had effectively gifted their home to their children has been attacked and even if the transfer was made years ago, the parties involved may find that there is now an income tax liability.

Do not underestimate the size of the black hole that Brown has to fill and if this lot get back in at the next election there will be pain all round not only with income and capital taxes but also with council taxes and business rates.

 

[snowleopard]

i wouldn't put it past them to do this which is why i've been keeping receipts for anything related to home improvements for some time.

up to now, most of the really vicious tax increases have affected only fairly small sectors of the population (e.g. IR35). if they introduce CGT on main residence they will be grabbing 40% of the biggest asset of over half the population and will thereby make themselves unelectable for the next 20 years. do turkeys vote for christmas?

 

[BlueChip]

[ QUOTE ]
I think this is probably good old-fashioned, pre-election scaremongering. A suspicion enhanced by the fact that it emanated from the Daily Mail, that well known hotbed of left-wing radicalism.

It would be electoral suicide to propose a tax like this. Whatever you may think of Gordon Brown, he isn't stupid.

[/ QUOTE ]

He plundered our pensions - what makes you think this is any different

 

[jhr]

The removal of ACT relief from pensions was a stealth tax - and I reckon most people with personal pension funds still don't understand what he did, or how it affected their savings.

Taxing capital gains on principle residences would be straightforward direct taxation and people would have to physically hand over hard cash. All governments, whatever their political hue, prefer to levy indirect taxes, because it's less emotive and/or people don't realise how much they are paying up. Britain has one of the highest proportions of home ownership in the World; I say again, it would be electoral suicide to bring in a change like this.

Far more likely, as others have said, is that Council taxes will continue to go up (because that can be blamed on profligate local councils rather than Central Government) and stamp duty will be hiked, particularly for higher value properties. Personally, I'd rather all the parties were a bit more straightforward about this, and levied local taxes on earnings, as a straight forward income tax. Before everyone jumps on me, I would probably lose out under such a proposal, but I think it's the best and fairest way of spreading the cost of local government and avoiding (for example) little old ladies trying to finance massive increases in Council tax from a fixed pension.

 

[Sgeir]

new approach to pensions needed

[ QUOTE ]
He plundered our pensions - what makes you think this is any different

[/ QUOTE ]
I do not think that either of the main parties in government over the last 20 or so years have come out of this with much credit. And I think it is too simplistic just to blame the present one:
<ul type="square"> For example, in 1980 Margaret Thatcher ended the state pensions link with earnings inflation, thus effectively cutting state pensions (and allowing tax cuts).

In 1987, again under Thatcher, companies were forced to take "pension holidays" (ie most employees still paid into the pot, but some companies didn't) because of taxation changes. This has been a contributory factor with the current deficits.

Later, in 1992 Norman Lamont launched the first tax raid on pensions, cutting dividend tax relief in two stages from 25% to 20%. And the rest is history.
[/list]
The politicians are otherwise pre-occupied at the moment, but hopefully, once the election is over, it may be possible to try and achieve some fresh strategic thinking on the whole issue. IMHO there is a real need to try and achieve a political and societal consensus on long-term pension provision. I do not believe that there is going to be any easy short-term fix.

 

[jhr]

Re: new approach to pensions needed

Agreed - though no company I have ever worked for (I'm in HR) has needed much coercion to pursuade them to take a Pension Holiday, in my experience.

But yes, pension provision is far too important to be left to short-term political expediency, whoever is in power.

 

[oldgit]

Do not believe a word of it me self of course,but has been suggested to me on more than one occasion that the real concern to many children of property rich parents,is less worrying about their old folks bank balance and more that they are relying on being able to repay their own profligate credit card and other loan borrowings from the eventual sale of the parental home.Surely not! /forums/images/graemlins/blush.gif

 

[Peppermint]

Re: It makes perfect sense

They've screwed up Pensions and Endowments but still the masses are funding their dissolute lifestyle based on the high value of their homes. Experienced workers are quitting work early based on the tax free lump sum gained from selling the old homestead.

Strange as it may seem HMG don't really want you swanning off into the sunset at 50. They want you working at the peak of your tax paying powers.

So how do you let the heat out of house prices, keep the old uns working and lower houseprices so that even muppets with a student loan can afford them?

See! Perfect sense.

 

[Bergman]

Re: No Problem

House for Sale - £4000
Carpets & curtains - £146,000

 

[snowleopard]

Re: No Problem

it's been tried with stamp duty - they take the value of the whole transaction.