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How Will Tax Changes by the UK Coalition Government Affect Real Estate Investment?

As expected, there looks to be both winners and losers when it comes to taxes under the new coalition government in the UK, but what will it mean for overseas real estate investment, asks leading portal for property in Spain, House Sales Spain (www.housesalesspain.com).

Although it's very early days for the Cameron-Clegg coalition, experts are indicating that the coming budget in the UK will see the most far-reaching tax changes in many years. What does this mean for investors in property, including investors in Spanish properties? The main issue that is likely to impact British investors in Spanish property is the anticipated hike in UK Capital Gains Tax. Some market analysts are predicting a move away from real estate investment if this increase comes into effect. This is because primary residences will likely be exempt from the tax change, with property investors and second home owners hit hardest by these changes.

Lucian Cook, Director of Savills residential research states that 'The expected changes to capital gains tax legislation will particularly impact higher income tax rate paying investors and second home owners, for whom the effective rate of tax could potentially rise from 18% to 40% or 50%. Investors looking to rationalize or reorganize their property portfolio, particularly those who have already seen good capital growth, could avoid a hefty tax burden by disposing of their asset before April 2011. This would include those who have bought investment property as a pension pot; some of whom may now be tempted to sell and invest in other asset classes.'

This could affect property sales in Spain as much as anywhere else in the world where there has been a thriving investment property market. It is possible that this tax change could see a rush of people looking to sell property in Spain before the tax change comes into affect, as well as passing an investment or second home property on to the next generation within this tax year before they will be eligible to pay the (potentially) much higher rate. For more information on real estate investment in Spain, visit www.housesalesspain.com.