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Disagreement over effects of capital gains tax increase

Disagreement over effects of capital gains tax increase

Contractor accountants might be interested in the opinion that an increase in CGT will have an adverse effect on the buy-to-let market. This was suggested by the chairman of the Residential Landlords Association, Alan Ward.

He said that the proposed rise will put investors off selling properties and deter landlords from improving any properties they have recently bought.

Landlords often spend money on newly acquired properties in order to improve or alter them and raise their standards before letting them.

It is expected that George Osborne will raise the rate of CGT on non-business assets in line with income tax when he presents his emergency budget next week. But Mr Ward warned that this will frustrate the housing market and kill investment.

Thousands of people, including limited company contractors, are in accord with Alan Ward. At least 17,400 individuals have already signed a petition, organised by the Daily Telegraph, calling on the chancellor to scrap the planned increase, and many thousands more have expressed their views on the Daily Telegraph website.

However, Professor Michael Devereux, from Oxford University, backs the coalition’s plan to raise the tax on buy to let properties and second homes. He is in favour of a CGT rise to the same level of income tax and feels that the people should not receive relief when disposing of assets they have held for a long time.

Some people have argued that the CGT rate should be tapered. In other words, it should decrease in line with the length of asset ownership time. But Devereux pointed out that there was no economic benefit to be gained by encouraging people to hold assets over the long-term.

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