22/06/2010 - CGT rise 'may damage rental sector'
Investment in the private rented sector could be hit by any increase in capital gains tax, it has been warned.
Long-term investors should be protected by the Government by a form of taper relief in the Budget, the Royal Institution of Chartered Surveyors has said.
It is widely expected that Chancellor George Osborne will raise capital gains tax from its current level of 18% to 40% or even 50% depending on the rate at which an individual pays income tax.
As many as 72% of RICS members thought such an increase would put off people from investing in the rental sector, rising to 100% 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."
Copyright © Press Association 2010
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