Capital Gains Tax Challenges In 2021—Effect On Property Investors
Hey, I’m Samuel Leeds! In today’s blog, I want to talk about Capital Gains Tax, and how the government is increasing property tax when you are selling your home.
I think that they are lying about what’s going to happen, about the effect, about what’s going to be. So, in this blog, I want to share my opinion on it, and how I think this is something manufactured in order to get the desired results rather than the truth.
Just a disclaimer: these are my thoughts and opinions on the matter, and I highly encourage you to do your own research on it.
Capital Gains Tax May Double Next Year
So the government has announced that the Capital Gains Tax is going to DOUBLE. Now, after this, everyone started screaming in horror. But let me tell you how much it’s going to affect me: very, very, very, very, very little!
Capital Gains Tax is the tax you pay on the profit you make when you sell a property that has increased in value over the years.
The government said that there could be an increase in the Capital Gains Tax in January, and everyone started panicking, including my fellow property YouTubers.
Let’s say you buy a piece of land in a company, you build, and then you sell it. You don’t pay Capital Gains Tax on it, you pay Income Tax. So if Capital Gains Tax goes up, it doesn’t matter!
When your home increases in value, you don’t sell it—you refinance it!
You know who’s going to be affected with the increase in Capital Gains Tax? Amateur landlords who don’t know what they’re doing. They buy a piece of land, build it, and they sell it. They have to pay the Capital Gains Tax. Not those who know how to handle these tiny details.
When you’re using the BRRR strategy, you pay zero Capital Gains Tax because you don’t pay tax on debt. When the value of the property goes up, you refinance it. Now, you may sell it if you’re buying to sell it. But if you’re buying to sell in a limited company, you don’t pay Capital Gains Tax anyways.
Why I’m Not Concerned
Most of the strategies that I’m teaching, BRRR, Rent-to-Rent, deal packaging, buying property to turn it into an HMO, don’t have Capital Gains Tax. Therefore, I’m not concerned about this.
Moreover, the people who make the rules in property are the ones who make money. Think about Section-24, which was a huge tax-playing change. I’m sure the government is helping with loans and Furlough. But the people who are going to be hit by this are not the wealthy or smart ones. The ones who are going to be hit by this are the ‘accidental landlords’ who sell properties when they increase in value.
What I personally think is that these people are deliberately scare-mongering. They want people to quickly sell their properties before the tax comes in next year so that the property economy could get a boost. It’s a way to incentivize people to buy. I know the property market well and I know for a fact that this is the case.
At the moment, there are a lot of buyers and not enough sellers. Therefore, they are making situations that encourage people to sell their properties. On the other hand, they are also bringing the Stamp Duty Holiday to promote buyers as well. When such a transaction happens, the government gets taxes from both buyers and sellers.
I hope you learned something from this blog. If you want to learn more about property investment, head over to my YouTube channel. Let me know if you would like me to write more on the topic!
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