Most landlords were rejoicing when they heard George Osborne announce a substantial cut in capital gains tax, that is until someone looked at the small print and found that he had exempted landlords from the windfall – drat!
Capital gains tax (CGT) is a tax on gains when selling assets, less buying, selling and improvement costs, so landlords would gain considerably from a cut, but sadly not to be.
However, for other assets it appears its really good news: the Budget announcement said that the CGT 18% rate will reduce to 10% and the 28% rate will reduce to 20% for chargeable gains. The exception is that new rates do not apply to chargeable gains accruing on the disposal of residential property, those that do not qualify for private residence relief.
A sweetener for the small-scale landlord perhaps is the announcement that the planned stamp duty hike on purchases of additional property will now include all those who buy more than 15 properties at one go, contrary to what was previously implied.
This will no doubt come as a blow to institutional investors who would otherwise have been exempt from the 3% stamp duty surcharge, which takes effect from 1 April 2016, and it may affect their investment plans in the future.
So, from 1 April, the extra 3% levy on top of the standard stamp duty rates will apply to all purchases of property which is not intended to be the purchaser’s main home, and even to the institutional investors backing or planning to back large-scale developments.
Some of the planned £600m raised will go on a new scheme to help the homeless.
David Cox, managing director of the Association of Residential Letting Agents (ARLA), has said:
“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 changes announced today the supply of available property is bound to decrease, and as a result rents will rise.
Richard Lambert, chief executive officer of the National landlords Association (NLA), has said:
“The Chancellor said that this government would tax the things it wants to reduce not the things it wants to encourage. On that basis, it’s clear he does not regard ordinary people putting their own money into providing homes as worthwhile.
“The steady upward ratchet of taxation on landlords over the past year shows that George Osborne is determined to bear down on the private rented sector, but he still depends on the tax revenues he expects to pull in from them.
“The NLA called for a short term easing of CGT to allow landlords to restructure their portfolios or to exit the market altogether but it appears that however much he wants us out, he can’t afford to allow us to leave.”
Landlords Excluded from Capital Gains Tax Cut – https://t.co/15NeRoh95a
— LandlordZONE (@LandlordZONE) March 17, 2016