Broker
Melanie Bien, director of Private Finance, said: “With rumours flying around of a Capital Gains Tax (CGT) increase to 40% or even 50%, it looks as though the Chancellor bottled it in the face of opposition from backbench MPs and traditional Conservative voters.
“Those who rushed to sell their second homes and buy-to-let properties ahead of the emergency Budget showed some foresight. But for those who didn’t, it is not the end of the world.
“However, the lack of taper relief is a serious mistake. Those who invest in property over the longer term, perhaps to supplement retirement income, will be unfairly penalised when they come to sell their assets.”
Buy-to-let broker
David Whittaker, managing director of Mortgages For Business, said: “While adjusting the threshold for CGT will raise more revenue, this change affects more people than a straight hike in rates.
“In the property market the liquidity pool is still relatively parched. A healthy property market tends to mean a healthy economy. But by taking more cash out of the pockets of these investors the Government is threatening to stunt the growth we expected to see in 2011.
“The rise in CGT combined with the income tax landlords already pay on rent means a double blow for investors.”
Equity release
Andrea Rozario, director-general of SHIP, said the increase in VAT could significantly boost the equity release sector.
She said: “Over 55s in the UK often have a relatively fixed income with spending weighted towards VAT-able products and significant equity in their homes. The changes outlined in the Budget mean that they will suffer from VAT increases eating into their income and then their families will be hit by death duties when they receive their inheritance.
“In addition, people relying on a comfortable public sector pension when they retire could face a nasty shock and will need to seek additional sources of retirement funding.
“Equity release would seem the logical answer to many of these issues and we believe that the Government changes will lead to more and more people considering equity release as an integral part of their pension planning.”
Technology
Paul Hunt, managing director of Phoebus Software, said: “We wanted to see Stamp Duty calculated like income tax. This would stop distortions of house prices at Stamp Duty limits and would allow properties to be sold for their correct value. This is a missed opportunity.
“Bringing CGT completely into line with income tax rates would have made property investors much more cautious about expanding their portfolios so it’s good it didn’t go up the whole way; although a lot of vested interests will still complain over the coming weeks. But with the deficit to tackle, property investors couldn’t hope for much more.
“The good news for landlords is that the inevitable cuts to the social housing budget will perpetuate the housing shortfall, support house prices and boost the rental market and raising rents in the long run.”
Estate agent
David Smith, senior partner at Carter Jonas, said: “Although tax rises are never good news, what the Government has achieved by announcing an increase in CGT immediately, is avoided panic selling by landlords and people with second homes, which could have seen the market flooded with properties as investors desperately tried to sell before the higher rate tax kicked in.
“Now investors will have to take a more measured and longer term view if they’re still planning to reduce the size of their property portfolios.
“For the property market as a whole, the Government’s decision to leave in place, for the time being, Stamp Duty exemption on properties up to £250,000 for first-time buyers, will be welcomed.”
Law
Nicola Plant, a partner in the private client team at Thomas Eggar LLP, said: “Many individuals with property and assets that might be subject to the new higher rate of tax have spent the last 12 months disposing of assets at the lower rate. CGT is something that generally only affects those who are better off and, as such, if they’ve missed the opportunity to sell now, provided they don’t need the cash, they can simply hold onto assets until fortunes change.
“If the need to release capital tied up in assets never arises then those families are more likely to consider giving away the assets to the next generation, which can potentially avoid both CGT and IHT.”
