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TODAY'S OTHER NEWS

Q: How to boost rental supply? A: Scrap stamp duty surcharge

The government could benefit to the tune of £10 billion and the rental market could have soaring supply if stamp duty was scrapped on the purchase of homes to let.

That’s the finding of economic consultancy Capital Economics which says removing the three per cent additional homes surcharge would see almost 900,000 new private rented homes made available across the UK over the next decade.

Due to increases in income and corporation tax receipts, the modelling suggests this would lead to a £10 billion boost to Treasury revenue over the same period.  

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Also, Capital Economics notes that these revenue streams would continue over the decades that follow, so long as the landlords do not later sell all these properties.

The National Residential Landlords Association - which commissioned the research - is calling on the Chancellor to adopt this proposal amidst a chronic shortage of homes to rent.

Capital Economics has warned that, if owner occupation and social housing continue at their 10-year average rate of growth, this would require a significant increase in the supply of private rented homes. 

Almost 230,000 new homes would be needed in the sector each year if government ambitions for housing over the next decade are to be met.

The association says that even if other housing tenures double their rate of growth, it would still mean over 100,000 new private rental homes a year will be needed over the same period.  

Capital Economics suggests that without changes in tax or other policies, the private rented sector stock will decrease further by over half a million properties over the next decade.

 

Ben Beadle, NRLA chief executive, says: “The government needs to wake up to a crisis of its own making. Taxing landlords out of the market serves only to cut supply, increase rents and make home ownership more difficult to afford.

“The evidence clearly shows that the supply of rented housing is declining as demand increases and will continue to do so. The government is taking a blinkered approach to the issue, which is not helped by its reluctance to admit mistakes it has made in the past.

"It makes no sense to tax the supply of new homes supplied by landlords investing in new build or bringing empty homes back into use. As this study indicates, removing the tax will actually generate more revenue, not less.”

Want to comment on this story? If so...if any post is considered to victimise, harass, degrade or intimidate an individual or group of individuals on any basis, then the post may be deleted and the individual immediately banned from posting in future.

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    I really dislike the following statement:
    "It makes no sense to tax the supply of new homes supplied by landlords investing in new build or bringing empty homes back into use.”
    If we buy new builds we are accused of preventing FTBs from getting a foot on the ladder as HTB was only offered on new builds. There aren't that many empty homes and only a percentage of landlords want to get involved in renovation projects.

    It goes on to say: "As this study indicates, removing the tax will actually generate more revenue, not less."
    While that is undoubtedly the case we can only buy if there are available houses to buy. Builders are building at a slow enough rate to keep the price of new builds sky high and very few second hand properties are being listed. In this area most of the houses listed on Rightmove and Zoopla as being available are actually Sale Agreed. A couple of weeks ago I phoned various agents about 8 different houses. Only 3 were still available. I phoned about an ex show house listed on Friday and was told they'd had over 100 enquiries for it. It wasn't cheap, it was on one of the worse plots on the development and it didn't even have a garage.

    So while removing the SDLT surcharge would undoubtedly encourage some of us to buy it's not quite that simple.
    We need available stock to buy.
    We need to know what is happening with EPC requirements.
    We need certainty that we can quickly evict tenants who don't pay their rent, cause malicious damage to the property or distress to their neighbours.
    We also need a better exit route regarding CGT.

    How many of us are holding on to properties that no longer really fit our business model because the current levels of CGT and SDLT mean it would be insane to sell them?

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    Hi Jo. I agree with most of what you say and we have to die to be allowed to give it away or retire.

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    I think when I decide to divest, I will pay off my mortgages one by one and give my properties as a gift to my children or grandchildren. No CGT and no IHT provided it's done at least 7 years before I die. They can then sell them with little or no CGT. I'm pretty sure the rules allow this.

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    There may be CGT. Even if you give it away I'm pretty sure you need to get a professional valuation and CGT is charged according to what it's worth not at what you receive.
    If it's mortgage free there wouldn't be any SDLT.

     
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    Peter. Time is your biggest asset. Yes, clear the mortgages asap. But as Jo says, just giving them away will attract CGT at current rates. However you have an annual CGT free allowance of 12.5k (25k if owned with your wife). Work out your allowance as a proportion of the capital gain, and then gift that proportion of the house to your kids annually. Example, you bought the house for £300k, now worth £400k. Assume owned with your wife, the CGT free allowance is 25% of the gain so you can gift 25% of the total house without any tax. Next year, rinse and repeat. I have a plan but it's about 12 years worth of transfers so start as soon as poss. You can keep the income but it will need a deed of trust to cover that.
    Jo is correct - no SDLT if the house is mortgage free.
    Stick up a note if any of the above isn't clear or if you need any links to appropriate articles

     
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    Jo's right. If you give property away you're deemed to have gifted it at market value and pay CGT on it.

    I have accidentally avoided CGT and IHT on the bulk of my portfolio because I bought much of it in my adult kids'names to avoid paying higher rate income tax on the rental profits. Now they pay higher rate taxes themselves I charge them management fees and give this to my grandchildren, reducing my and my own children's eventual IHT.

    I wasn't clever and the main benefits of avoiding CGT and IHT are accidental but welcome.

    Another potential option is to borrow against properties, give the money away, and hold on to the properties until you die. The big risk is if you have to sell, you're still liable for CGT but might not have enough equity left to pay it. The same applies when selling a highly mortgaged investment property which could result in negative cash flow for you but a bonanza for the taxman!

     
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    Robert, I think that a lot will depend on how old Peter is and how his health is. I started the gradual transfer to my kids, as per my previous post, at the age of 59, so with a fair wind, I'll get enough transferred to them to avoid any IHT. I also have the satisfaction of using up all my annual CGT allowances, and my wife's. My year 1 cost was about £700 in legal fees, now about £300

     
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    What is the Government's housing plan - other than to screw the landlord either which way they go! Wiith high stamp duty and Section 24 of the Finance Act we are discouraged from buying and with increases on capital gains tax we are discouraged from renovating or selling. Mixed messages all the time!

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    I am confused, everything the government has done up to now appears to be aimed at discouraging us from investing !! Add into the mix the total confusion over if we need a minimum of EPC C in the future, and who would invest right now? I see the direction of the market going down the BTR route, they don’t want the small BTL LL’s involved….. as said… I am confused

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    You're not confused, just correct.

    The Tories don't want small landlords and want the PRS for their big business cronies and donors.

     
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