The Daily Telegraph - Saturday - Money
George Osborne’s legacy of half-baked, wholly-botched taxes
It’s quite remarkable how many of George Osborne’s tax initiatives aren’t surviving the tests of time. Riddled with traps and exclusions, and resulting in entirely unexpected – and often unwelcome – consequences, it appears a great deal of legislation was pushed through under his watch that nobody had properly thought through.
Mr Osborne had ambitions to implement sweeping change and at the same time to win warm headlines. And, in fairness, he did do both.
But looking back it seems – like something out of an episode of the political satire The Thick of it – that he was concocting policy in the back of a taxi on the way to the press conference at which it would be unveiled.
Thereafter armies of desperately scurrying Treasury officials would fall to the hell of drafting the detail, and somehow bring the flimsy but eye-catching initiative into a legislative, functional reality.
The emergence now of the miserable aspect of the Help to Buy Isa, whereby savers’ promised bonuses can’t readily be used as part of their deposit, is just the latest of his tax projects to unravel.
Here are a few others.
The stamp duty change where it pays couples to get divorced
Mr Osborne’s reckless use of stamp duty as a revenue-raiser has stifled housing transactions and damaged labour mobility, but its effects on some families’ finances have been far more bizarre.
From April higher rates of stamp duty became payable on second property purchases.
Where the detail starts to fall apart is around married couples, who are treated as a single unit for the purpose of the duty.
The common situation where couples marry, each owning a property, and then choose to sell one and buy a new family home, is creating havoc for lawyers and conveyancers.
By keeping the other property they must pay the higher stamp on the new. Even if the new property is bought only in the name of the spouse who owned the sold one, the higher rate arises because the duty treats married couples as one.
Hence divorce, in many cases, would bring great savings.
The anomaly where tax becomes due on zero income or a loss
So much hatred is directed at private landlords (not commercial ones, for some reason) that the perversity of Mr Osborne’s tax attack on this sector is largely lost in the red mists of rage.
You will remember that in 2015 he announced the removal over time of the ability of private landlords to deduct mortgage interest from rental income before calculating tax due. The move was greeted with delight from predictable voices on the left, who foolishly think that hugely increasing landlords’ costs – or driving them out of business altogether – will somehow help young tenants or Britain’s housing supply crisis.
In practice it means paying tax on money that goes to the bank. So landlords with large loans and low yields will pay tax even where there is a loss. Others will find they are pushed up into a higher tax bracket while pocketing zero extra income.
This swipe at an unpopular group, not consulted upon and heedlessly rushed into legislation, is already driving up rents.
The real lunacy though is in its unequal application.
If the landlord is a multi-billionpound conglomerate owning thousands of mortgaged properties, tax relief is still available. But if they are middle-class parents with one buy-to-let flat bought for their child, they will be clobbered.
The inheritance tax ‘perk’ that promises fresh nightmares
Mr Osborne’s extra £175,000 death duty exemption applying to the family home – bringing up to £500,000 per person the full exemption – is yet to apply. But the ability to “capture” your tax break if you downsize to a cheaper property already has lawyers’ brows knitted in horror at the likely entanglements. And the fact that the tax break applies almost exclusively to those with children has angered loving godparents, uncles and aunts.