Tax hike will hit buy-to-let sec­tor

Kentish Gazette Canterbury & District - East Kent Property - - Front Page -

As many as a quar­ter of all land­lords in the buy-to-let sec­tor could sell up and quit the in­dus­try if the coali­tion govern­ment car­ries out its threat to sharply in­crease the rate of cap­i­tal gains tax (CGT), says a new anal­y­sis. Ac­cord­ing to LSL Prop­erty Ser­vices, owner of the UK’s largest let­tings agent net­work, a tax rise could also trig­ger a short­age of pri­vate rented ac­com­mo­da­tion – as po­ten­tial new land­lords de­cide not to get in­volved. LSL claims that nine out of 10 land­lords op­pose pro­pos­als to raise CGT for sec­ond home­own­ers and in­vestors, while 26 per cent of land­lords polled will con­sider sell­ing up be­fore the higher tax is in­tro­duced. Nearly three quar­ters of land­lords (71 per cent) say a steep CGT rise would make them “re­con­sider fu­ture in­vest­ment in prop­erty.”

Gains

The agency says that while 30 per cent of land­lords give equal im­por­tance to rent and cap­i­tal ap­pre­ci­a­tion, 36 per cent of re­spon­dents con­sider cap­i­tal gains the most im­por­tant as­pect of prop­erty in­vest­ment. Of these, a quar­ter state that they only con­sider cap­i­tal gains when judg­ing an in­vest­ment. Simon Em­b­ley, chief ex­ec­u­tive of LSL, said: “Over the past two years, in­vest­ment prop­er­ties have ac­counted for 30 per cent of sales across our net­work – over 40,000 trans­ac­tions. Foist­ing a tax hike on in­vestors will drive many from the hous­ing mar­ket – at a time when its re­cov­ery is still per­ilously frag­ile. If po­ten­tial land­lords are dis­cour­aged from in­vest­ing, we will see a large pro­por­tion of the de­mand for house pur­chase dis­ap­pear, and house prices may fall. “A fur­ther fall in house prices will see more home­own­ers in neg­a­tive eq­uity po­ten­tially trig­ger­ing a sig­nif­i­cant rise in re­pos­ses­sions as own­ers lose con­fi­dence in the mar­ket. “Un­less the CGT rise is ac­com­pa­nied by ta­per re­lief which re­duces the rate of tax ac­cord­ing to the pe­riod of own­er­ship, it is long-term in­vestors who face the steep­est tax de­mands.”

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