City workers have already seen their spending power greatly reduced as a result of other announced tax hikes. With effect from April, anyone earning more than £100,000 will see their personal tax allowances reduced, and those with an income of more than £150,000 will be taxed at a top rate of 50%. In addition, individual bonuses of more than £25,000 paid to bank workers before April are subject to a 50% levy paid by the bank which will affect the amount employees receive. These bonuses are also liable to income tax from the employee.
James Hyman, Partner for Residential Sales at Cluttons, said: "The Budget will be more important for the property market than the election. Many are concerned about a possible rise in CGT – particularly investors and those with second homes in the form of city pieds-a-terre who are looking to sell. While stock in the capital remains historically low, we have noticed a trend that the properties that are coming to the market are from investors wary of a possible capital gains tax hike and cashing in on the current high prices being achieved.
"The previously announced changes to income tax bands and banks bonuses will already have severe repercussions for the Central London property market as liquidity is greatly reduced. A hike in CGT on top of this could have a serious impact on property values."
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