The Chancellor's emergency budget announcements have received a mixed response from those in the know in the property sector.
The rate of Capital Gains Tax has risen from 18 to 28 percent for higher rate taxpayers but remains at 18 percent for basic rate taxpayer, as it will for gains made prior to June 23.
The annual exempt band will remain at £10,100 for 2010/11 and increase in line with inflation in future years.
David Brookes, Tax Partner at BDO LLP commented: “At first glance, keeping the lower rate of 18 percent for basic rate taxpayers seems generous, but this is likely to have only a limited benefit as, in many cases, the capital gains themselves are likely to push taxpayers into the higher rate band, for example gains on the sale of a buy to let property.”
However Laurence Glynn, partner at estate agency LDG, feels the Budget is good news for investors and the property market in general.
“It means that anyone holding back from putting their property on the market may consider their options more favourably, not only due to the lower than expected rate, but because they will be encouraged that investment buyers are unlikely to be deterred by the increase,” he said.
“Approximately 30 percent of our property sales last year were to investors, and we don’t expect a decline in investment purchases following the announcement.”
Graham Kinnear, Managing Director of Landlord Assist, also believes property investment will remain a sound financial proposition.
And Jonathan Moore, director of www.easyroommate.co.uk , points out live-in landlords will have emerged unscathed from the Budget and should see an increase in tenant demand in the short-term, as social housing looks likely to be in the firing line for future funding cuts and investment in the private rented sector feels the effects of the higher CGT.
Furnished Holiday Lettings (FHL) rules will not be withdrawn as part of this new Budget, although the new government will publish a consultation document over the summer highlighting plans to change the FHL rules after April next year.
Kate Stinchcombe-Gillies, spokesperson for holidaylettings.co.uk, said: “The number of second home owners letting out their properties to paying guests has grown enormously in the last five years as more and more realise the value added asset hidden in their holiday home.
“Today’s news comes at a time when demand for holiday home accommodation, both in the UK and EEA, is still soaring.”
However, landlords associations are the most scathing of the Budget news.
A spokesman for the Association of Residential Lettings Agents (ARLA) said: “The Chancellor risks driving those landlords paying the higher rate of tax from an already very fragile housing market, at a time when they should be actively encouraged to stay and, ideally, further invest.
“In particular, neglecting to include rollover relief is a big gamble, as many landlords will now be penalised by CGT – and hit by Stamp Duty – when they sell one rental property and purchase another.”
David Salusbury, chairman of the National Landlords Association, (NLA) is pleased the rate hike wasn’t higher but added: “Nevertheless, the increased rate will affect the vast majority of landlords who supplement a modest income with their lettings activity.”
Residential Landlords Association (RLA) chairman Alan Ward is also concerned that the omission of taper relief from the Budget will work against landlords who have held property for a longer period and that the higher rate rise will cause some complications where property is jointly held by husband and wife landlords.
