Assetz® News - A Budget for buy-to-let?

A Budget for buy-to-let?

13th March 2008 |

Everybody hopes for something in the Budget. Smokers, drinkers and car drivers hope for mercy. Businesses hope for tax cuts. Those on benefits hope for more help and the housing industry has implored chancellor Alistair Darling to make major changes in stamp duty to help first-time buyers.

Of course, not everybody will emerge from any Budget happy, given the differing and sometimes contradictory aims of different interest groups. In a Budget taking place at a time of slower economic growth and therefore greater pressure on public finances, the likelihood was always that there were going to be many disappointed people.

However, the buy-to-let sector may have done well out of the Budget. The first reason lies not in what was hoped for before Mr Darling stood up in the House of Commons yesterday, but was proposed several month ago when it was stated that capital gains tax was in line for major reform. This announcement, which meant that those selling part of their portfolio could expect only to have to pay a flat rate of tax at 18 per cent, was pleasing to many, not least those who would not be penalised through not having held onto their asset for a long time.

It was, therefore, the absence of any retraction or delay to this change, which comes into force next month, which has delighted the National Landlords' Association (NLA). Hailing the "strength and stability" of the Budget, the NLA chairman David Salusbury said: "Landlords who have acquired property in recent years who are looking to sell will be pleased to hear that the planned changes to the capital gains tax regime go ahead next month. It effectively means landlords who want to release some equity from their portfolios will only pay a flat rate of 18 per cent on their capital gain." The only pity, he said was that landlords were not being included in the entrepreneurs relief measure, which will only charge ten per cent to the first £1 million.

Another relevant issue was stamp duty. In the last few days many stakeholders in the property industry have urged Mr Darling to raise the one per cent stamp duty threshold from its current £125,000. In the event, the only help given in this respect was to those who were buying a house jointly, where no stamp duty will be payable until such householders own 80 per cent of the equity in the property, plus a zero stamp duty levy for those in zero-carbon flats. The thresholds remained unchanged.

This has brought a highly critical response from those who had campaigned for a change. Stewart Baseley, executive chairman of the Home Builders' Federation - which had called for a doubling of the lowest threshold to £250,000 - said: "This Budget ignores the vast majority of first-time buyers, leaving them without the help they need to make the first step onto the housing ladder."

Peter Bolton King, chief executive of the National Association of Estate Agents, similarly commented: "This was an opportunity for the chancellor give the housing market the boost it really needs to keep the market moving but he has failed the British homeowner again."

While the continued difficulties of those seeking to get on the housing ladder are not to be celebrated, the obvious fact remains that if some people cannot buy they will have to rent. Buy-to-let will benefit from continued high demand for such accommodation as long as the situation is unfavourable to those trying to get on the housing ladder. Therefore stamp duty, by remaining a major burden - especially for those in the south where house prices are higher - could continue to keep people renting.