The current capital gains tax (CGT) rules don't give you any breaks for inflationary gains. This means if you've owned an investment property or second home for a long time and decide to sell, you might end up paying a hefty amount in CGT. The rules treat the entire gain from the time you bought it to when you sell it as if it all happened in the year you sell. So, only the current year's tax-free allowance applies to the gain. This can be a big problem if you've taken equity out of the property to put deposits on other investments.
Inflationary gains and the CGT trap
Inflationary gains and the CGT trap
Inflationary gains and the CGT trap
The current capital gains tax (CGT) rules don't give you any breaks for inflationary gains. This means if you've owned an investment property or second home for a long time and decide to sell, you might end up paying a hefty amount in CGT. The rules treat the entire gain from the time you bought it to when you sell it as if it all happened in the year you sell. So, only the current year's tax-free allowance applies to the gain. This can be a big problem if you've taken equity out of the property to put deposits on other investments.