George Osborne announced that a new reduction in the rate of capital gains tax would not apply to investment property. Is it a case of more buy-to-let discrimination?
The Chancellor used the Budget this week to send a message loud and clear that he stands firmly in the camp of homebuyers and has little interest in landlords and their profits.
He announced that a new reduction in the rate of capital gains tax would not apply to investment property.
It means landlords will not benefit from the new rate of 20 per cent for higher rate taxpayers and 10 per cent for lower rate taxpayers from the new tax year starting on April 6.
Capital Gains Tax rate remains for landlords
Instead they will continue to pay the current rates of 28 per cent - or 18 per cent respectively - on any gains they make when they sell a property.
The property industry immediately criticised the move, saying it could lead to fewer homes on the market for sale and a rise in house prices as it discourages investors from selling.
Some landlords are looking to offload less financially viable properties after the Chancellor previously announced other tax changes. These include a reduction in the rate of tax relief available from 40 per cent to 20 per cent and an extra 3 per cent stamp duty charge on buy-to-let properties.
Stephen Ludlow, of estate agents ludlowthompson, said: “If the Government dissuades investors from selling their property because of significant tax charges, the market will become entrenched.
“Despite the Government wanting to increase availability stock, house prices may be pushed up as investors put fewer properties on the market, which could allow an asset bubble to grow.”
Discrimination against landlords
Mr Ludlow added: “The Government should stop discriminating against the buy-to-let industry as investors play a vital role in ensuring labour mobility and improving the standard of rental stock.”
David Cox, managing director of the Association of Residential Letting Agents, agreed, saying: “This is now the third Budget which directly attacks landlords. The sector has been punitively taxed, with stamp duty on buy-to-let properties, mortgage interest relief and now capital gains tax changes. It’s an outright assault on the sector.
“Every other sector has been offered a tax break - yet there is nothing here to help the private rented sector, including landlords - and most importantly tenants - who will see rent costs rise to subsidise the taxes that landlords pay on property.
“The Government talks about wanting to help the younger generation get onto the property ladder, but with the latest changes announced by the Chancellor the supply of available property is bound to decrease, and as a result rents will rise.”
The Chancellor has clearly had landlords’ profits in his sights during the past year and this latest move to deny them the tax breaks enjoyed on other assets means this trend shows little sign of abating.
Was yesterday’s Budget yet another attack on landlords? Tell us your thoughts in the comment section below.