Government urged ‘Stand firm for CGT fairness’

"We have an urgent budget deficit and a pressing need to rebalance the economy towards productive enterprise. Any u-turn to preserve tax breaks for Buy-to-Let investors or second home owners would be a betrayal of First Time Buyers and the wrong choice for future economic health.

"The tax system gives clear signals as to what type of economy and society we want to become. Any backtracking on CGT by George Osbourne would be a red flag against enterprise and equity and a green flag for rent seeking and speculation. Over the last ten years, we have seen at least 1.2 million first time buyers displaced from the property market by Buy-to-Let investors – now is the time to redress the balance. We think it is important that the views of first time buyers are heard in this debate in opposition to those who stand against the CGT increase. We are not surprised at the strong reactions from those with vested interests – such as the National Landlord’s Association – who are worried about their own property empires rather than the pressing national issue of housing affordability."

Recent research by PricedOut found that unequal purchasing power due to the UK tax system and lax financial regulation has given buy-to-let investors an unfair advantage over first time buyers, and lies behind the growing displacement of first time buyers from the housing market. Council for Mortgage Lenders data analysed by PricedOut shows that, for an average first time buyer property, buy-to-let investors’  mortgage costs – given their tax advantages and common use of interest only mortgages – amount to just over a seventh of their net income. In comparison, first time buyer average mortgage costs amount to a nearly a third of net income.

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0 thoughts on “Government urged ‘Stand firm for CGT fairness’

  1. Major Landlord

    Ms. John’s well-intentioned crusade to have CGT hiked to 40% or more, disregards the very real difference between property speculators and the many people for whom property is a real, long-term business that provides high quality rented accommodation to a large proportion of the population.

    I have no more time for speculators than she has. They have driven up property prices which adversely affected every one of us in one way or another. I am certainly in favour of any tax move that drives these parasites out of the business.

    But what about the many professional landlords for whom their investments are long-term, and for whom rental revenue is a more important source of income than capital growth? We often find ourselves needing to trade up to better and/or larger property, to move from one area to another, or to sell property to finance improvements elsewhere in our portfolios. If the government takes 40% or more of the capital gain every time we do that, how can we afford to sustain investment or re-invest? All that happens is that government syphons money from the PRS, much as odious speculators do.

    Nobody asked Gordon Brown to drop CGT to 18%. That was ludicrous, and played right into the hands of speculators. And what was wrong with the old, taper relief system he scrapped? That could be reintroduced to stop speculators by giving little or no CGT relief in the first five years, with progressive relief up to 10 years.

    Letting housing is a serious business, requiring heavy investment and hard work – and it should be treated as such. As part of this, CGT should be scrapped on any disposal when the gain is reinvested within 12 months. And professional landlords should be allowed to offset CGT against trading losses elsewhere in their property business.

    Like it or not, the PRS plays a vital role in UK housing. It’s a cheap, easy trick for the LibDem part of our coalition government to extort money from it, and the end result will be a reduction in good rented housing stock. But clever changes to the taxation system for professional landlords will drive speculators out, and keep good landlords in.