Changing Times and Taxing Situations…

 

The recent change in Government heralds a new tax regime for both income and capital gains taxation. As this new tax regime is announced and implemented, it is important to understand and assess just how this will impact upon your financial position.

 

If you are the owner of a second home and/or buy-to-let property you should seek advice from an experienced accountant as to your increased liability from capital gains tax and explore ways to minimise the tax payable before making any decision to sell.  Delaying a sale and utilizing your annual exemption by making gifts to family members over a few years may be one solution, but it’s important for you to take experienced legal and financial advice to ensure this route is consistent with your overall financial goals.

 

One question I’ve been asked a lot recently is, “Will the increase in capital gains liability deter buyers of residential property for investment?”

 

My response to this is: “Probably not.” With interest rates for cash investments still low; buy-to-let mortgage rates comparatively low; the demand for rental property fairly high and the strong bargaining power of a non-dependant investment buyer, a buy-to-let property still provides a good return.  In addition, the buy-to-let owner is in control.  They have the flexibility to realise the capital invested in the property and generate further future capital, which cannot be said of other investments such as pensions. 

 

There are also further changes implemented by the outgoing Labour Government to be aware of that affect buy-to-let properties.  Little publicised, from 6th April 2010, planning permission for change of use will be needed if a property is to be let to three or more non-related persons (typically students or young persons) if the property has not previously been used in such a way.  Enabling local authorities to determine how many and where this type of rental property can proliferate, although many authorities have not yet formulated their policies, it is imperative advice is sought from an experienced solicitor before buying your buy-to-let property. 

 

Ensuring your financial goals can be achieved to your benefit, talk to your accountant and property solicitor.  Understanding how taxation changes will affect you may mean one less headache and taxing situation.

If you would to speak to Barbara about one of her articles, or are looking for advice on the sale or purchase of a property, please feel free to call us.