Connecting North West business to relevant training, insight, conversation and each other

Changes to Capital Gains tax take effect

The recent budget changes come into effect on 6th April 2016 and investors who own funds and shares are likely to benefit from the reduction in Capital Gains Tax (CGT).

However, the changes excluded “Landlords”.

The new rates for 2016/17 are:

  • 10% tax where an individual is not a higher rate tax payer
  • 20% tax where the individual is a higher rate tax payer, or the gain takes them into higher rate tax band.

Everyone has £11,100 CGT allowance each tax year before paying any tax.

These changes offer potentially big wins for some, but landlords or second property owners will continue to pay CGT at 18% or 28% on any gains when they come to sell the property.

The announcement in the budget was certainly a surprise, and offers investors an opportunity to review their portfolios to ensure they are taking maximum advantage of these new rules.

Landlords however have suffered from the increase in stamp duty land tax surcharge, adding a hefty 3% to the up-front tax bill facing those buying investment properties, along with no changes to the CGT position on disposal.

Landlords will also suffer due to no longer being able to offset all of their mortgage interest against their tax bill, as this is being phased out.

Now is a good time for landlords to review their property portfolio’s and assess whether these remain attractive given these changes, as more and more landlords that normally pay basic rate taxes could fall into a higher tax bracket.

At Napthens Wealth Management we are here to help our clients make the right choices.