A Reasonable Budget for Property

“A Reasonable Budget for Property”

There have been mixed messages surrounding Tuesday’s budget, with most criticism predictably coming from those now sitting on the opposition benches.

Whilst everyone was expecting tough measures, those announced are unlikely to have a major impact on the recovering property market. The Stamp Duty tax break for first time buyers up to £250,000 remains in place, which is good news. The two main changes concern Capital Gains Tax and VAT.

CGT is rising with immediate effect from 18% for basic rate taxpayers to 28% for higher rate taxpayers. This nevertheless remains well below the 40% it used to be until just three years ago. This is unlikely to affect the majority of homeowners as in the UK, unlike many other countries, we enjoy tax exemption from any appreciation in the value of our principal residence.

However, second home or buy-to-let owners will need to take this new regime into account when deciding whether or not to sell. An important consideration is that any gain is actually added to income for CGT purposes and could well tip a basic rate taxpayer into the higher rate bracket.

The good news is that this change is immediate. Had the chancellor decided to implement this from eg. the next financial year, there would have been a flood of properties entering the market in order to avoid the hike, thereby undermining prices.

VAT is to rise from 17.5% to 20% from January. This 2.5 point rise is again unlikely to affect property prices as it will only apply to certain costs of sale such as removals, solicitor’s fees, and estate agency fees. The actual figures involved are relatively nominal, and are unlikely to prompt people to sell as a direct result. At xxxx agency we’ll be absorbing the difference for all our selling clients for a whole year in any event!


©Copyright 2010 Richard Rawlings except as excluded under licence.