Osborne 'to tax foreign property owners' on profits they make from UK homes to deflate London and South East property bubble

George Osborne will move to deflate the London and South East property bubble by forcing foreign property owners to pay tax on the gains they make selling UK homes, according to reports.
The Chancellor of the Exchequer is considering announcing in his Autumn Statement in December that capital gains tax will be imposed on non-resident property sellers for the first time, according to reports yesterday.
Speaking this morning, Mr Osborne would not deny the reports, saying: ''I am only a month off my Autumn statement so I am not going to comment on specific tax affairs - it's not a leak that comes from anyone near me'. 'The only reason I don't want to deny it is because I don't want to then get into a whole list of other things you are going to ask me about,', he added.

 

 

Capital city: George Osborne is reportedly ready to apply capital gains tax to foreign property owners who have driven price in areas like Kensington, London, to record highs.

UK residents must pay CGT - at 18 per cent for basic rate taxpayers but more usually 28 per cent - on proceeds from the sale of second homes. This does not currently apply to non-resident owners.

Imposing the tax would reduce the attraction of UK property to foreign buyers who have been blamed for helping to push property prices to record highs and taking home-ownership out of the reach of many UK workers. The Treasury would not comment on the speculation.
The Government has faced criticism that its loose credit policies, including Help to Buy and Funding for Lending, have added to property demand without increasing supply, driving prices higher in the process. The Nationwide Building Society today reported that 'affordability could become stretched' as wages fail to keep pace with rising prices.
It said the average UK home now costs £173,678.

Affordability crisis: House prices have increased but average wages have continued to decline in real terms

UK property, particularly in London, has become popular with cash-rich foreign buyers who regard it as a safe haven asset that seemingly only goes up in value. Land Registry figures confirmed this week that prices in the capital had risen 9.3 per cent in the past year.

 

The gains look to be accelerating and sellers have become even more bullish about the price they can get. Last week, figures from property website Rightmove showed asking prices in London rose 10.2 per cent between September and October alone.
The booming market in desirable London areas is putting cash into the pockets of sellers, who in turn add to demand in surround areas in the South East, pushing prices there higher too.
Taxing the property gains made by non-resident owners is already common in other EU countries.
Ronnie Ludwig, partner in the Private Wealth Group at accountants Saffery Champness, said: 'The possibility of charging non-resident property owners to CGT on sales of second homes in the UK would bring the UK into line with what happens on most of mainland Europe.
'This could adversely affect the market for foreign second home owners in the UK, particularly in the traditionally up-market areas in our major cities, London being the most commonly sought after.'

What tax do you pay on property gains?

You do not pay capital gains tax on profit made from selling your own home. The tax kicks in on proceeds from the sale of second homes.
A property counts as your main residence if, for the WHOLE time you've owned it, it has been your only home or main residence AND you have only used it as your home and nothing else
Britain’s flat rate capital gains tax is levied at 18 per cent for basic rate taxpayers and 28 per cent for higher rate taxpayers, however long you have owned an asset.
But the system adds your profit onto your annual income to decide whether you fall within the basic or higher rate tax brackets and then allows you to deduct your annual capital gains tax allowance of £10,900.