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Exchequer Jeremy Hunt’s move to reduce capital gains charges on property sales from 28% to 24% could lead to disillusioned landlords leaving the property sector, experts have warned.
The changes are set to come into effect from April 6, a document published by the Treasury alongside the Budget said: “This will help landlords and second home owners sell their properties, including those looking to get on the housing ladder. “It will make more properties available to a variety of buyers.” first time. ”
The move means higher rate taxpayers could save £680 on a £20,000 gain on a second home.
However, some commentators said the government should play a role in encouraging the creation of new rental stock, rather than a move that could reduce rental stock.
Andrew Norton and Phil Blackburn, partners and business advisers at Lubbock Fine Chartered Accountants, said: “The government appears to be encouraging landlords to buy privately and persuading them to exit the market.” .
Leapit’s UK&I general manager Steve Richmond added: “While this may increase transactions (as the Chancellor claims), this is simply a shift in supply from the already heated rental market to the sales side. “We are wary that this only means more rents to be sold, as disillusioned landlords take advantage of this opportunity to sell, leading to rent increases amid reduced supply in the sector.”
In a longer response, Kate Davies, executive director of the Intermediate Mortgage Lenders Association (IMLA), argued that changing the 3% stamp duty surcharge would have been a far better move.
She said: “The Chancellor’s announcement…is just consolation for landlords who are being forced to exit the private rental sector due to tough economic conditions and a punitive tax system.
“IMLA had hoped that the Chancellor would provide further support to the sector by announcing a reduction in the 3% additional stamp duty that has been levied on second and subsequent property purchases since 2016.
“This additional tax will be an additional financial burden for private landlords, who provide housing for 20% of UK households, but our research shows that mortgage costs will increase by 80% over the next two years. It is expected.
“Incentives to encourage landlords to invest in more properties and increase supply, given the dramatic imbalance in supply and demand in the private rental sector that is driving rents to record levels. It would be very welcome.”
On 1 January 2025, the tax-free amount of capital gains will be reduced from £6,000 to £3,000, which will offset the reduction somewhat.
Ryan Etchells, Together’s chief operating officer, was more positive, calling it “a welcome move that will help us expand our market to a new wave of buyers and real estate professionals.”
He added: “This will give confidence to those who have been putting off downsizing options and will open up more family homes and space to first-time buyers.” This should give the real estate market a much-needed blow. ”