Buy-to-let landlords should be given tax breaks on the profits they make from their properties, argues Conservative MP and co-founder of Hunters estate agents Kevin Hollinrake. Chancellor George Osborne omitted them from the business sectors which would benefit from capital gains tax cuts which he announced in his Budget statement.
He excluded residential properties from the tax cut which reduced the higher rate from 28 per cent to 20 per cent and the basic rate from 18 per cent to 10 per cent. This means landlords still have to pay a hefty 28 per cent tax bill when they sell.
The Residential Landlords Association (RLA) is calling for the new 20 per cent rate to be extended to private landlords if they sell to a sitting tenant, a move which is being backed by the MP. RLA research showed that three-quarters of private landlords would consider selling to tenants if they did not have to pay so much CGT.
Mr Hollinrake approves the move as he argues an amendment actually supports the Government’s objective for more people to own their own properties. The RLA believes that some landlords may look at other sectors in which to invest their money if the rental market is not financially worthwhile. By offering this tax incentive, it may offer buy-to-let investors a way out of the market without taking a huge financial hit.
If landlords are sitting tight and not selling at the moment, the Treasury loses out in any case. By cutting CGT so that property investors are aligned with other businesses, more may sell up which will bolster the Government’s coffers because they would be paying the 20 per cent tax. It would also benefit those tenants who want to buy the house they are already living in rather than be forced to look for alternatives if they wish to get a foot on the property ladder.
This would be welcome relief for landlords who are already paying a three per cent surcharge in stamp duty each time they invest in a buy-to-let property, compounded by the uncertainty relating to the UK’s decision to leave the European Union.
In addition, the National Landlords Association chief executive officer Richard Lambert says that he welcomed the Bank of England governor Mark Carney’s statement that there are contingency plans in place to ensure financial stability as a knee-jerk reaction could affect mortgage rates and, therefore, rents paid by tenants.