UK Landlords Benefit From Reduced Tax Burden

by Robert Lee, Tax-News.com, London

29 August 2008

Landlords in the UK who waited until after tax changes went into effect in April before selling their properties have managed to slash their tax bills in half, new research has shown.

According to the study by the buy-to-let lender The Mortgage Works, landlords who sold in the first quarter of 2008 - before the introduction of a new capital gains tax regime in April - faced a combined CGT and cumulative income tax bill of GBP34,895 on a house and GBP34,603 on a flat. These figures are based on a selling price of GBP200,000 and a cumulative property price appreciation of 43% on houses and 42% on flats in the five years to the first quarter of 2008.

By contrast, those who waited until after the tax reforms were introduced in the second quarter reduced their total tax bill to GBP16,581 for houses and and to GBP15,975 for flats, a reduction of about one half.

The new CGT regime was announced by Chancellor of the Exchequer Alistair Darling in the pre-budget report last October. Under the new system, since April 6, 2008, there is a single rate of capital gains tax of 18%.

However, while those who sat tight and waited until after the reforms were introduced have clearly been well rewarded with a lower tax bill, it has been suggested that the number who did so is relatively small, given the slowdown in the UK housing market.

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