From April 2015, capital gains tax (CGT) will be payable on future gains made by non residents who sell property in the UK, Chancellor George Osborne has announced.
Gavin Pluck, director for Europe at Guardian Wealth Management, said the Chancellor’s decision is understandable but may jeopardise the level of foreign investment streaming in to the UK.
“Foreign investment has proven to inflate house prices and the current bubble is making it increasingly difficult for people to get their foot on the housing ladder.
“However, this move – no matter how popular with UK home seekers – could risk damaging the UK’s reputation as an attractive destination for foreign investment and curb a much-needed income stream.
“While implementing a tax on foreign buyers and non-UK residents will undoubtedly prove popular with the masses, the UK government must be careful to ensure it has a well-thought through plan.
He added: “The UK should consider adopting a sliding scale taxation for those who have held properties for five years or more and who will have been unwittingly caught in this new trap. This would help create a much fairer system without jeopardising the main goal of helping alleviate the housing bubble due to foreign investment.”
Meanwhile, Knight Franks pointed out while non-resident purchasers account for 28% of central London property purchases, their share of the wider Greater London market is far smaller at around 12% of all new-build property purchases in Greater London at the current time.