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Capital Gains Tax update 💹

18th March: Capital Gains Tax (CGT) may be due a rise which could cost around £8,000 per property! 💰 Tax made simple below 📩

📢 The Treasury is due to unveil proposals for CGT reform 🆕 Whether it's next week, or later this Autumn 👀 

What is CGT
If you have a second home, and sell it - broadly, you pay tax on difference between how much you bought and sold for - this is called CGT 🏡🏡

Current Rates
18% for Basic Rate Taxpayers (BRT)
28% for Higher Rate Taxpayers (HRT)
Annual allowance is £12,300 (on which no CGT would be paid)

Proposed Rates
20% for BRT
40% for HRT
Annual allowance £2,000 (on which no CGT would be paid)

How much extra will you pay❓*
Average price in last 10 years rose £168,703 to £251,500
Average capital gain £82,798

BRT today would pay £12,690
BRT proposed would pay £14,100

HRT today would pay £19,739
HRT proposed would pay £28,199

💬 “The government seems intent on targeting Landlords and second homeowners as the cause of the current housing crisis. The reality is, their failure to build enough homes” - Marc von Grundherr, Director of Benham & Reeves

*Thank you Benham & Reeves for doing the stats on this ✅

Rents on the up! 📊 

IMAGE ABOVE | INVESTMENT OPPORTUNITY | 3 separate flats on 1 title | NG7 | Current annual rent £17,880 | Gross yield 5.8% | Rents are expected to rise to £21,000 next year! | Offers in Excess of £310,000 🤝

📢 15th March: Supply shortage of rental property means one thing: rents are increasing. Latest research by Hamptons: 🔍

➡ Tenants faced with significantly less choice 🤷‍♀️
➡ 300,000 fewer properties entered the rental market in the last 12 months compared to the year before 🔻
➡ Number of rental homes on the market fell by double digit percentages last month compared to February 2020 📉
➡ Rents being pushed up as a result 📊
➡ 50% of Landlords have secured a higher rent than they had previously (average increase of £60 per month) 📈

Further extension to ban on evictions ‍⚖️

📢 10th March: Housing Secretary, Robert Jenrick, announced:

➡ An extension to the ban on evictions until 31st May 📆
➡ Landlords to provide six-month notice before they can evict 📝
➡ This means most renters can stay until at least December ✋

Exemptions:

🚫 Anti-social behaviour (4 week notice)
🚫 False statements provided by the tenant (2-4 weeks)
🚫 Over 6 months’ accumulated rent arrears (4 week notice)
🚫 Breach of immigration rules under the ‘Right to Rent’ policy (3 months)

An inadequate victory for renters 🤔 As in, more time will be welcomed by Tenants - but a targeted financial package is needed to help pay arrears down, or there's a danger that extensions may lead to more debt in the long term 💳

Can I have a 25.1% gross return please? 🥇

9th March: Can I have a 25.1% gross return please?... Yep sure ✅ (see example below) 👀

No stamp duty ➕ Low interest rates = Irresistible for investors 🍥🍨🍦

ℹ Extension gives investors a second chance to purchase without SDLT
ℹ End of lockdown will hopefully see professionals return to city centres

Irresistible? 🍰 Yes and no...

✅ With no SDLT and record-low interest rates - not to mention rising rents - now's a brilliant time to invest in property 📈
❌ However, the cost of being a Landlord has increased significantly (due to tax reform, Covid-related arrears and void periods, licensing, additional legislation and safety regulations 📋

🥇 Overall, the low rates is the determining factor which makes property so worthwhile right now:

Sale price ➡ £130,000
Deposit ➡ £32,500
BTL mortgage ➡ £97,500
Annual interest at 1.75% ➡ £1,706.25
Total paid in year 1 by Landlord ➡ £34,206.25
Total gross rental income in year 1 ➡ £8,580
Total gross return on investment25.1%

If you left your £34,206.55 in a 'high' savings bank account, you'd have enough at the end of the year to buy... 🍫

Posted 24 March 2021
by Ali Baylav Managing Director Cavendish Residential

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