Stealth tax could slash BTL property sales profits
Landlords in London could fall into an income tax trap after selling their buy-to-let properties if changes to the Finance Bill pass through parliament, according to the Law Society.
The warning follows the government adding clauses to the Finance Bill that is due to go before the House of Commons on 5 and 6 September.
The amendments are designed to make profits from the sale of a BTL investment or second home in liable for income tax rather than capital gains tax as at present.
The Law Society says this means anybody who sells a property that is not classed as their primary residence could be forced to pay up to 17% more in tax.
CGT on investment property sales is currently charged at 18% for basic rate taxpayers and 28% for higher rate taxpayers. This is payable on any profit earned on the property minus the £11,100 CGT Allowance and other reliefs available.
Income tax, which BTL landlords pay on the profits they make from renting out homes, is currently 40% for anyone earning more than £43,000 a year, rising to 45% for the highest rate payers.
The change is designed to prevent investors using offshore structures to avoid UK tax. However, the charges are not restricted to offshore structures and apply to UK-based landlords.
The Law Society has attacked the amendments, claiming they have been “slipped in” by the government at the Bill’s committee stage instead of being part of the formal legislation which is subject to a standard consultation period.
Law Society chief executive Catherine Dixon comments: “The way these changes were introduced starts to feel like legislation by stealth.”
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