Are Potential Changes by The Government to Capital Gains Related Tax Going To Hit Self-Builders Harder Than Others?

[Daveattavistock]

I have recently started to think about the capital gains tax position of my self-build property.

 

Up to now it has been my primary residence and therefore has no current CGT liability.

 

However, there has been a lot of ‘kite-flying’ (to test public reaction) from the government and Rachel Reeves over potential changes to the CGT rules.

 

Several, influential left-leaning think-tanks (that Labour listens to) have forcefully pushed the case that all house price inflation is ‘unearned’ and should be redistributed (heavily taxed)

 

A full imposition of CGT on primary residences is unlikely but there may be new tax changes coming that are linked to CGT values and calculations on certain categories of property.

 

The danger here for self-builders is that they, technically, have no conventional property purchase price to use as a starting point in any CGT calculation.

 

Many self-builds are achieved at a very low cost base which puts us at a severe disadvantage when it comes to a CGT calculation start.

 

I initially moved into my self-build in 2003 and it cost me £65,000 for the land and £95,000 in materials and labour.

 

It is now worth between £700,000 and £750,000.

 

Its initial huge jump in value was entirely down to my initiative and over 12,500 hours of hands-on work over an extended construction period (I also had a separate full-time job)…. but there is probably no mechanism in their rule books for HMRC to take that into account.

 

If you are a non-UK resident you can rebase you property value to April 2019 for a CGT calculation…. but there is no option like this for a UK resident.

 

There also does not seem to be any rule which would allow a UK resident self-builder to use a market value at the time of the property completion… it would be down to a very uncertain negotiation with HMRC.

 

I have written to my MP to ask if they would make representations to the government to avoid unfair treatment of certain property owners like us due to what are, sometimes, very blunt and all-encompassing tax instruments.

Edited Sunday at 10:04 by Daveattavistock

[ProDave]

We can only guess until what they are actually going to do is known.  It is no surprise they have to raise more tax from somewhere and "those rich home owners" are seen as an easy target.  Except an awful lot of people are now "those rich home owners"

 

As with most things this government do* , it would result in unintended consequences, like people not moving house and a whole section of commerce (estate agents, mortgage companies, removal companies, builders etc) grinding to a halt.

 

* whoever would have guessed placing more tax burdens on employers would result in them employing fewer people for instance.

[Daveattavistock]

I agree with you but once it becomes law it is already too late.

 

The time to make representations is before amendments to a bill are tabled.

[Temp]

It will be a nightmare.

 

Some self builders will have made a loss.

 

Many will have difficulty proving the build cost.  Why keep builders invoices if there was no VAT to reclaim?

 

 

[Alan Ambrose]

The government is desperate(it shouldn't be but it is) and I think that means they will cast avaricious eyes over any wealth with a view to taking a slice of it. Politically, their best choice is probably targeting smaller groups without much say or influence and who can't or won't take much avoiding action. The boomers house price inflation is an obvious target.

 

It would be good to make the tax system have a bit more common sense and fairness - sudden tax cliffs and now-we've-got-you paperwork snafus (e.g. CIL) are grossly unfair and penalise the not-so-smart or simply unfortunate. =

 

Stamp duty is just silly, we've looked at moving a couple of times, but the stamp duty payment would be eye-watering, so like a lot of people we just stay put. An annual property tax instead would be fairer and encourage people to downsize if they don't need the space. 

 

>>> The danger here for self-builders is that they, technically, have no conventional property purchase price

 

Well they do, and I'm sure we, for instance, won't make much gain, but it does involve keeping good records.

 

[Russell griffiths]

Stop giving money to fat people to sit at home all day. 
there money problem solved. 
 

the amount of fat lazy dole bludgers over in Tenerife a few months back was staggering. 
 

my place doubled in value as soon as we got planning in place, it has since doubled again with a house on it. 
 

at least by the time I come to sell labour will be a horrendous memory. 

[Nickfromwales]

16 minutes ago, Russell griffiths said:

at least by the time I come to sell labour will be a horrendous memory

They're all lying, 2 faced, self-serving assholes though. Not just any one of them.

[BotusBuild]

Talking to a conveyancer recently about this and they said most likely that stamp duty will disappear and an annual property tax will be introduced instead. This will be in place of the CGT rumour/kit flying.

 

It beggars belief that in a little over a year, the UK finances are apparently in such  a poor state. There's a lot of reasons, people, past governments that have a hand in this situation. We really should have followed the Norwegian model of handling North Sea oil revenue to create a sovereign fund.

 

 

Edited Sunday at 17:09 by BotusBuild

[nod]

Anyone with any assets are not safe while this government is in power 

The working man has become Benefits man under this left wing government 

We where about to set trust funds up for our children Now we are being advised that they may not be safe 

 

Im planning to close my business down and spend as much money as I can 

 

Weve sold all our 22 rentals due the law changes 

Theres no incentive to better yourself in this country 

 

I would advise anyone planning to self build or any other ventures To do it as quickly as possible before the rules change 

This government are intent on squeezing every penny out of you and I (The Rich )

 

 

[Nickfromwales]

1 hour ago, nod said:

Anyone with any assets are not safe while this government is in power 

The working man has become Benefits man under this left wing government 

We where about to set trust funds up for our children Now we are being advised that they may not be safe 

 

Im planning to close my business down and spend as much money as I can 

 

Weve sold all our 22 rentals due the law changes 

Theres no incentive to better yourself in this country 

 

I would advise anyone planning to self build or any other ventures To do it as quickly as possible before the rules change 

This government are intent on squeezing every penny out of you and I (The Rich )

 

 

Yup.

 

Gluttony and corruption come with the territory, and then you add to that the joy of them being ‘influenced’ by the elite.

 

They only have to blag their way through 4 years, and then off the toddle with another chunk of our money…..”set for life”.

 

Makes my blood boil.

 

Any trust for my kids will be cold hard cash, in a box, where nobody can see it, smell it, steal it, or take most of it to perpetuate their failures.

 

Just a sinking ship, and the water is now pouring in faster than it can be bailed out.

[Crofter]

6 hours ago, Russell griffiths said:

Stop giving money to fat people to sit at home all day. 
there money problem solved. 

Have you ever claimed JSA yourself?

[Crofter]

2 hours ago, nod said:

Weve sold all our 22 rentals due the law changes ...

 

This government are intent on squeezing every penny out of you and I (The Rich )

Well if somebody who owns more than 22 properties isn't rich, who is???

[Roger440]

Its going to get a lot worse yet.

 

Property and pensions are the 2 biggest stores of wealth.

 

Expect them to be raided increasingly over the next few years, until we go bust and go to the IMF for a bailout.

 

Aside from leaving the country, theres not much most of us can do. 

 

 

[Roger440]

1 minute ago, Crofter said:

Well if somebody who owns more than 22 properties isn't rich, who is???

 

If you "own" them, then yes, id agree you probably are.

 

However, i suspect they were not "owned", but ill not speak for the person in question.

 

But id be less hasty to judge.

[nod]

19 minutes ago, Crofter said:

Well if somebody who owns more than 22 properties isn't rich, who is???

I don’t own any rentals 

[Daveattavistock]

If the government opts for an annual property tax instead of tinkering with the CGT then there might be an advantage to owning a self-build property.

 

According to think-tank proposals on this, the national property tax would cumulatively accrue at a certain percentage of the value of any property over £500,000 on an annual basis...and then would only be payable when the property is sold.

 

To avoid double taxation in the changeover period, anyone who paid stamp duty on the purchase of their property would not pay this tax at all.

 

Most self-builders, up to this point, will have only paid stamp duty on the land purchase which would be a much lesser amount than the purchase of an existing property.

 

For example, in my case, I only paid 1% stamp duty of £650 on a plot purchase of £65,000.... but this would still exempt me from this new national property tax.

 

However, there is this great big disconnect between the fact that the government needs a lot of money now.... and not at some distant time in the future.... so what might they be tempted to also do?

 

There is also the question of how properties are going to be valued.

Edited yesterday at 10:17 by Daveattavistock

[BotusBuild]

13 hours ago, Crofter said:

Have you ever claimed JSA yourself?

Yes, it lasted all of 6 months and then is cut off, after paying in for close on 40 years, you get next to feck all in return

[-rick-]

I can't see how an annual property tax replaces stamp duty easily (from a government perspective). The talk I've read is about an annual property tax replacing council tax with CGT replacing stamp duty. I can see how that would make sense and likely be a relatively positive thing if done purely on a cost neutral basis (not that any government would do it on that basis).

 

Also not sure how exempting people who had paid stamp duty on their purchase would allow any change to work. If the governments reason for making the change is to raise money but do it as part of a reform that raises the money in a 'fairer'* way than just raising existing taxes, then giving every current property owner an exemption would mean the policy will raise less money than the current policy for potentially decades as the housing market turns over.

 

* whether whatever policy they come up with is actually seen as fairer overall I reserve judgement. Seems likely to be quite unfair to people who happen to live in London and surrounds.

[Daveattavistock]

I think the property tax that would replace council tax is a Local Property Tax separate to the National Property Tax which is only paid when the property is sold.

[Russell griffiths]

18 hours ago, Crofter said:

Have you ever claimed JSA yourself?

What’s that. .?

[Nickfromwales]

11 minutes ago, Russell griffiths said:

What’s that. .?

Job seekers allowance. 

[Nickfromwales]

18 hours ago, Roger440 said:

Aside from leaving the country

My nest egg / semi retirement is pointing at Spain or Portugal.

 

This place is beyond repair.

[Daveattavistock]

47 minutes ago, Nickfromwales said:

My nest egg / semi retirement is pointing at Spain or Portugal.

I agree with you about the state of the UK... the Chief Constables are signalling to us all that we are on our own now as far as justice goes.

 

We looked at moving to Spain over the last decade but in the end decided against it for several reasons.

The first is that the tax and inheritance laws are very different to those in the UK.

The personal allowance in Spain is around half that in the UK so you will pay a lot more tax.

If you keep a bolt-hole back in the UK they will force you to declare it or face draconian penalties.

If you don't dispose of all your UK properties before you go you will be charged capital gains tax when you do sell.

Living in Spain through June, July and August can be unbearable due to the heat.

It gets very cold at night in Spain in the winter...although we go to Nerja in Jan / Feb for its microclimate and sunshine... but it still gets chilly at night or when cloudy during the day.

 

[Nickfromwales]

17 minutes ago, Daveattavistock said:

I agree with you about the state of the UK... the Chief Constables are signalling to us all that we are on our own now as far as justice goes.

 

We looked at moving to Spain over the last decade but in the end decided against it for several reasons.

The first is that the tax and inheritance laws are very different to those in the UK.

The personal allowance in Spain is around half that in the UK so you will pay a lot more tax.

If you keep a bolt-hole back in the UK they will force you to declare it or face draconian penalties.

If you don't dispose of all your UK properties before you go you will be charged capital gains tax when you do sell.

Living in Spain through June, July and August can be unbearable due to the heat.

It gets very cold at night in Spain in the winter...although we go to Nerja in Jan / Feb for its microclimate and sunshine... but it still gets chilly at night or when cloudy during the day.

 

It’s just a different place / life / community. Moneys not everything. 

[Crofter]

2 hours ago, Russell griffiths said:

What’s that. .?

If you've never claimed it, and don't even know what it is, maybe you should think twice before blaming the country's financial problems on it. 

 

I've been a JSA claimant twice in my life. I was only successful once. Honestly the most degrading and miserable thing I've ever done. And this was years ago before things were tightened up. I didn't have to face sanctions like they do today.

 

I went in to the experience expecting to feel slightly guilty that I was getting 'money for nothing'. But they make you work so hard to jump through all the hoops- especially as a newcomer to the system- that in the end I felt that I had earned every single miserable hard won penny.

 

These days it's much worse. And disability benefits are even more demeaning. I have a friend who was a waitress. She suffered a stroke and was unable to go back to work. Every six months the DWP pay for her to go to Inverness where she meets an assessor who has been flown there and put up in a hotel, just so that he can say yes, you're still paralysed down one side. 

 

It's not about saving money. It's about making people feel worthless.