The Capital gains tax on properties
Do you have gains tax on the profit when you sell your property?
This is a way for the government to get tax income on a profit you may or may not have.
In some countries, there is a capital gains tax when you sell your property, if and only if you have made a profit. But this capital gains tax is subject to fairness…..
Lets assume you buy a property in 1990 for £100.000. Normally a property gain value each year with a few percent. Lets also assume you wish to sell the property for the market value of £172.295 in 2015. Then you would need to pay taxes on the capital gain of the property increase of £72.295.
If the average inflation rate has been 2,2% each year, then the value of the money, £172.295 in 2015 has the same real value as £100.000 in 1990, which is the exact sum you bought your property for. So in reality, you are paying capital gains tax on a value that really isn’t any capital gain. You are paying capital gains tax on the general value increase due to inflation, and not on any profit.
If you had sold your property for a market value above the £172.295, then you would have made a profit. And in all fairness, perhaps you should only pay capital gains tax on the profit above inflation increase...??