The new government says it is committed to scrapping those controversial Home Information Packs, meanwhile the Lib Dem part of the new coalition has agreed to dump its plan for a “mansion tax” on homes valued at more than £2 million. However, next month’s emergency Budget holds threats for, among others, buy-to-let landlords and second-home owners.
Capital gains tax on “non-business” assets may well be hiked from 18 per cent to rates “close to those applied to income”. This could mean the tax rising to 40 or 50 per cent on the profits made when selling a buy-to-let property or a second home.
Such an increase could cost owners thousands of pounds, especially if - as has been suggested - the tax-free £10,100 CGT allowance is also cut. If you were planning to sell a second property, tax advisors say you should probably do so before the Budget just in case the CGT hike comes in immediately. However, it may take effect next April, or the rise could be backdated to the start of this tax year, so selling would fix your liability at the new rate.
Transferring a second property into joint names before selling could help married couples as both partners’ CGT allowances can be offset, potentially making the first £20,200 of gains tax-free.
Avoiding CGT through MP-style “flipping” may be possible. By temporarily nominating a second home as your “principal private residence”, it becomes CGT-free for the three years before its sale.