Business & Finance0 min ago
40% Capital Gains Tax on house sales.
On Sky news yesterday morning, it was reported (in fact, I think it was a newspaper review) that Labour were considering imposing a 40% capital gains tax on the sale of your main house.
If this is the case, what is the justification?
I am not posing the question in order to argue about the rights and wrongs of Labour's taxation policy - I am genuinely interested as to how they would attempt to justify the tax.
Also, does anybody agree that the tax is justified?
Answers
1 to 18 of 18
Best Answer
No best answer has yet been selected by Ducati. Once a best answer has been selected, it will be shown here.
For more on marking an answer as the "Best Answer", please visit our FAQ.
Surely it would just be a tax on unearned income? Interest in the bank is taxed. The tax would only be on the inflation adjusted profit, and could be amde to take into account improvements made. If it slows down the rise in house prices and stops bores blathering on about how much money they have made then there is a side benefit as well
Apparently Paul Boateng, chief secretary to the Treasury, refused to rule out such a tax in the Commons last week. In their usual inimitable fashion, Tories used that as yet another bandwagon to leap aboard. Goodness knows how many different directions they have galloped off in in recent days aboard these fairytale vehicles!
As Bangkok says, such a move would simply be a tax on unearned income. If we all have to pay tax on earned income, why should we get away with paying none on unearned? (By the way, I myself own a house which has increased in 'value' - note the inverted commas - by about 600% in 20 years.)
I can�t see how CGT would help the housing market. Many people either couldn�t afford to move due to the CGT bill they would have to foot or house prices would have to increase even further so sellers can factor in the CGT liability, pricing just about everyone but the very rich out of the market. Would this mean that people my parents age who have lived in their modest house for over 20 years but which is now worth around �200k more than they bought it for all those years ago have to pay 40% of �200k if they choose to move? I think the actual method of determining the amount that is subject to CGT would be an administrative nightmare, which itself would be costly as iit would not necessarily be easy to distinguish between an �inflationary � rise which is not subject to CGT and a �windfall� rise which is. If there is a housing crash in the next year or so and those who have bought in recent years find themselves in negative equity, will they receive any kind of tax rebate? The government needs to tackle the housing market problem from the bottom up, providing affordable, quality housing to single people and young families who cannot afford to get on the property ladder.
I don't get the whole unearned income arguement: I accept I probably don't get it because I am mid right of center, but I just simply don't see why people should be taxed should they choose to sell an appreciating asset. If somebody has scrimped and saved and worked hard to pay for a mortgage, often sacrificing other luxuries to do so, why should their reward be a hefty great tax bill?Lots of older people choose to sell often to downsize in order to realise some of the equity to enable them to enjoy a bit of life after a lifetime of hard work. How is this just? How? Personally I think it is is immoral.
And to echo somebody elses point, If I bought a house which fell into negative equity, could I expect the negative equity to be wiped out? I have no control over the house depreciating so why should I be responsible? Surely if I am taxed because my property appreciated, which I had no control over, surely it should follow that help would be there for falling house prices. Perhaps a refund of the stamp duty: or a rebranding of the council tax band.
Yeh, right.
I think the general principal is that capital gains tax is levied on an asset that has appreciated in value due to an investment risk taken by the owner. For example stocks and shares.
Whether CGT on houses is "fair" rather depends on whether owning a house is a necessity for life or whether it is an investment which has matured.
It might threfore be logical to try to seperate out houses that are not what you might call a necessity through a threshold. There is already a precidence for this in stamp duty.
In the UK there is currently an allowance of �8,200 before you have to pay any CGT, then 10% on the first �2,020, 20% on the next �29,380 and 40% on the balance.
Additionally husbands and wives have seperate alowances so a house held in both names would presumably get double relief - If you think this is likely to happen and your house is held in one name you might like to think about changing this.
Also money spent in increasing an asset's value can be deducted so keep those builders bills!
They won't need to justify it if they're playing to the audience of those on benefits who are living in rented accommodation as they won't care whether or not those who have bought houses get the proceeds taken away or not. Rip me to shreds if you like but I am fed up with there being no incentive to work and save. I'm sorely tempted to sell our house, move into somewhere rented and spend all the cash. Then if we fall on hard times let someone else pay because it happens all the time.
No but Sky news are very likely to come up with a story like this before one.
You have to remember that a lot of newspapers and media have owners who have a particular political viewpoint and they want that put over.
Rupert Murdoch is one of the worst offenders.
Probably what has happened is that they have asked the treasury if they can "rule out" this suggestion which the treasury refused to do - politicians never rule out anything unless they're backed into a corner - Instant story of the right flavour.
The question anyway was actually could it be justified?
I think gain in house prices is clearly "unearned income" and can easily be justified with a few provisos.
I believe the sale of houses that are not your prime residence already attracts CGT as they are seen as investments.
If a house is sold in less than say 5 years and is over a certain value say 250,000 it could be likewise considered an investment and taxed as such.
It's a lot more justifiable to tax income derived from the appreciation of assets than income tax where you are taxing the result of peoples labour.
At the end of the day nobody likes paying tax and we all think we are personally overburdened but if we want to spend billions of pounds freeing the people of Iraq somebody's going to have to pick up the tab.
Yes you�re right CGT applies to the sale of a property which is not your main residence and rightly so as a second property is not a necessity. In this country we seem to see people who have nice big houses and flash cars as being fair game for being taxed to the hilt. These people do not suddenly wake up one morning to find a nice, comfortable life having fallen into their lap from nowhere. In most cases, these people have worked hard to get there and taken risks and made sacrifices and I resent the fact that this industrious �can do� attitude is penalised. Most people pay for their homes with earned income that has already been taxed and to subject the sale of your home to a potentially hefty tax bill over which you have no control, unlike current stamp duty the cost of which can be predicted, is unfair.
In an awful lot of cases money comes from money - I've never actually seen any figures for how many millionaires come from wealthy families - It'd be interesting.
In the long run there are 2 competing political ideologies and you will tend to support one or the other. We could call them big and small government. In small government such as in the US very small amounts of tax are collected and very small amounts of public service provided - No health service - you have to pay your own insurance - Very little social security - again you have to look after yourself etc. etc.
Large government where the state collects more tax and provides more service is more characteristic of European countries.
Personally I find the US model encourages a self-centered philosophy - Health insurance is fine - provided you can get it. Low social security leaves people very often at the mercy of employers who often exploit them terribly.
I can understand other people who feel that they would rather live under that sort of government - I'm just not one of them
1 to 18 of 18
