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Capital Gain Tax for Overseas Buyers to Tackle London House Bubble

  • George Osborne CGT

George Osborne is considering the introduction of CGT on foreign property investors. The move aims at tackling the issue of soaring prices increase in the South East and particularly London.

Under current legislation, only UK resident home owners have to pay capital gains tax on their properties. The tax amounts to 18% but rises to 28% in case of profit being made when reselling all but first home properties. When overseas investors buy a property in the UK, they are exempted from CGT, if they go on to sell the property in the future. However, many overseas buyer already pay taxes on their UK properties in their own counties.

With London house prices leaping to an astonishing 10% increase in just one month, it comes to no surprise the property market, especially in London, is more than ever a hotspot in UK finances and high on politician agendas.

According to the Office for National Statistics, house prices in London rose by 9% last August, while every where else in the UK had an average increase of 2%.

The increase has been partly ascribed to the heavy presence of foreign investors, especially for what concerns London. It is a fact that, during times of financial insecurity, one of the most secure places for investment is the UK capital property market.

According to the estate agency Knight Frank, 70% of the most expensive, recently built London properties have been purchased by overseas buyers, 65% of which, it is estimated, intend to rent them out rather than live in them.

The point of chancellor Osborne's idea is that non-resident home owners should pay the same taxes on their properties as British home owners.

Amid fears of driving foreign business out of the UK market, Mr Osborne aims at introducing CGT on foreign property at the Autumn Statement in December, while the Treasury has already assessed provisional costs for the measures.

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