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Budget: captial gains rise could stifle property investment

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Increasing capital gains tax (CGT) could deter investors from putting money into the private rented sector, it has been claimed.

The Royal Institution of Chartered Surveyors (RICS) has called on the government to introduce some form of taper relief in the Budget to protect long-term investors from the full impact of any rate hike.

Later today chancellor George Osborne is widely expected to announce plans to hike capital gains tax from its current level of 18 per cent to 40 per cent or even 50 per cent, depending on the rate at which an individual pays income tax.

But RICS said research found that 72 per cent of its members thought such an increase would deter people from investing in rental property, rising to 100 per cent in the West Midlands.

Simon Rubinsohn, RICS chief economist, said: ‘Our research indicates that an increase in the rate of CGT is likely to deter new investors from entering the buy-to-let market, at a time of acute shortage of affordable accommodation.

‘And while it is unlikely that there will be a near term glut of supply, a ‘fire sale’ of properties by landlords looking to avoid a higher rate of CGT could if it were to materialise have a significant impact on the fragile improvement in sentiment in the residential sector.

‘One way of limiting the damage from lifting the CGT rate is to re-introduce some form of taper relief on income from certain types of asset.’

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