Tag Archives: Chancellor

Government plots raid on landlords to plug £50bn black hole Buy to Let News, Landlord News, Landlord Tax Planning, Latest Articles

The government will target landlords in a bid to plug a £50bn hole in the country’s finances, reports reveal.

The move could see landlords losing thousands of pounds when selling their property under proposals which will come as a fresh tax blow for investors.

One report says that landlords could face an £8,400 squeeze in capital gains.

The revelation of the plan comes after thousands of landlords have already cashed in and left the PRS this year after facing increasing legislation, punitive tax changes, the potential of section 21 being abolished and having to upgrade properties to potentially meet an EPC rating of C.

Those who have sold up have enjoyed years of house price growth – but the Government now looks set to take a bigger slice of the profits made when selling.

Increasing the headline rate of CGT

That’s because the Chancellor, Jeremy Hunt, is looking at increasing the headline rate of CGT – and shaking up allowances.

Experts say that if capital gains were to be aligned with income tax, which has been recommended previously by a Government tax advisory body, then a higher rate landlord would not pay the current 28% on any gains, but 40%.

One analysis by tax accountants Blick Rothenberg has calculated that the move would see a higher-rate landlord paying an extra £8,400 in tax.

Their calculation is based on buying a property in 2017 for £226,000 and selling it today for £296,000 to achieve a gain of £70,000.

The tax firm points out that a second homeowner who bought a more expensive property would be hit even harder under the proposals.

‘Landlords are considering their options in the property market’

The firm’s Nimesh Shah told the Daily Telegraph: “Many individual landlords are considering their options in the property market, given increasing mortgage costs, and the compounded effect of the mortgage interest relief restriction introduced in 2017.

“With the suggestion that landlords will be hit with significantly higher capital gains tax, investors will need to seriously consider selling their properties before any rate rise takes effect to ‘lock-in’ the current highest rate of capital gains tax of 28pc.”

Other proposals being discussed include raising the rates on dividends or reducing the £2,000 allowance.

The Government’s plan would be a blow to those landlords who have been relying on the capital appreciation of their investment property or holiday let as a pension plan.

Various news outlets say the plan could be unveiled as part of the Chancellor’s Autumn Statement.

It follows a move by Rishi Sunak in 2020 when he asked the Office for Tax Simplification to review capital gains tax in an effort to simplify the tax regime in the UK.

Budget 2014 – “For Makers Doers and Savers” Landlord News, Latest Articles

Budget 2014 – what are the main points for Property118 readers and the PRS.

The Office for Budget Responsibility (OBR) confirmed the GDP forecast to grow by 2.7% this year, 2.3% next year, 2.6% in 2016/17 and by 2.5% in 2018. GDP (economic output) will finally reach its pre-credit crises levels this year. This is a 3 fold rise in previous predictions last year.

The key hidden statistic given by the OBR in this budget was that they predict CPI inflation to remain at 2% (the Bank of England’s target inflation figure) keeping pressure to increase interest rates lower than would be expected despite improving growth levels. It is also predicted that earnings will rise faster than inflation again keeping pressure on the Bank Base Rate lower in the short term at least.

Lack of new property supply has  greatly affected the recent rapid rise in house prices (mainly in the South East). The Chancellor George Osborne announced support for building of more than 200,000 new homes, Help to Buy equity loan scheme extended to 2020 and support for future new garden cities such as 15,000 new properties in Ebbsfleet.

The Chancellor will expand the tax on residential properties worth more than £2m to those over £500,000. He said “those properties bought through corporate envelope will be required to pay 15pc tax duty. Many of these are empty properties held in corporate envelopes to avoid stamp duty. This abuse will end.”

Many people who invest in property do so as some form of retirement planning and the unexpected “rabbit out of the hat” in this budget was an increase in peoples ability to choose how they spend their pension funds upon retirement.

  • All tax restrictions on pensioners’ access to their pension pots will be removed ending the requirement to buy an annuity.
  • The taxable part of pension pot taken as cash on retirement to be charged at normal income tax rate instead of the current 55% tax rate
  • There is an increase in total pension savings people can take as a lump sum to £30,000

For money in our pocket income tax levels:

  • The point at which people start paying income tax will be raised to £10,500 from the increase to £10,000 already for this April.
  • The 40p High rate income tax threshold is to rise from £41,450 to £41,865 next month and by a further 1% to £42,285 next year

The budget deficit forecast for this year is 6.6% of GDP, 5.5% in 2014-15 then falling to 0.8% by 2017-18 with a surplus of 0.2% in 2018-19. This will lead to a 40 Billion decrease in interest payments on the National Debt a saving of £2000 per UK family per year!

The Chancellor announced a total Welfare Spending Cap of £119bn for 2015-16, rising in line with inflation to £127bn in 2018-19. This includes Housing Benefit and how this will affect rent levels for Landlords in this sector will remain to be seen.

I put this budget to Property118 readers for your comments.Budget 2014

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