Budget measures over Capital Gains Tax won’t hit buy-to-let, says Guy Garrard, head of business development at Tiuta
As we are all too fully aware two budgets in a year can rarely be a good thing. The emergency Budget did promise some sweeping changes to businesses, individuals and entrepreneurs but it didn’t quite reach the heights that were dreaded by many. Amongst the industry there was widespread fear that Capital Gains Tax would be raised to 40% as the Liberal Democrats had promised before the election, or even up to 50% as in line with the top band of income tax. Obviously it transpired that the actual rise was to 28% and although it is still 18% for lower-rate taxpayers, experts are warning that significant assets sales would push plenty of people into the higher rate of tax.
The debate on the potential of a hike up to 40% had been well reported amongst the trade and national press in recent weeks. Voices have been raised regarding the potential impact on the buy-to-let market and landlords with the government urged to reconsider from various areas of the industry. After the event it has been speculated that it was Conservative MPs and these various voices/campaigns that forced the government’s hand. Now is it just me or does this climb down smack just a little of political spin?
Only a matter of minutes after the announcement there was a story to the effect that a mass sell-off of property had been averted because of the Capital Gains Tax rise to a ‘mere’ 28% and not the 40% as per the widespread predictions. There was also a later headline that Capital Gains Tax campaigns forced such a climb down on the rate. Now maybe this is the sceptic in me coming right to the fore but by not previously dismissing the possibility of a rise to 40% and maybe even maintaining the growth of this particular seed, the government has managed to take the sting out of such an announcement by dampening the impact of a not insubstantial 10% rise. I wonder whether the government actually had any real intention of implementing any such 40% level in the first place and successfully rode on the back of these rumours. It also seems to have worked to appease the people who have urged the government to reconsider such a dramatic rise. Clever stuff.
But despite all these convoluted conspiracy theories they ultimately mean nothing as what really matters is how we, as an industry, deal with this decision.
In response to the announcement I agree with the sentiments of Stuart Law, chief executive of Assetz, when he said that: “This move is not likely to have a negative impact on the UK property market as speculative investors are unlikely to sell off their buy-to-let property once this new tax rate is introduced. Professional property investors are generally looking at the long-term benefits and see the importance of the regular income rather than short-term capital gains.””
