As a ‘painful’ Autumn Statement looms, Black Brick boss Camilla Dell shares her views on what the Chancellor should address.
By Camilla Dell
Ever since Sir Keir Starmer stepped into the Downing Street garden and issued a warning that the forthcoming budget would be “painful”, commentators have been predicting a whole range of possible tax raids, writes Camilla Dell.
Black Brick’s view is that imposing indiscriminate tax hikes is a short sighted approach. What a Government looking for growth, prosperity, and a healthy, active housing market should be doing is encouraging people to buy, sell, invest, and, most of all, remain in the UK.
Capital Gains Tax
It is widely anticipated that CGT for second home owners and landlords will be increased from a current maximum rate of 24% to up to 45%. Across the UK, landlords have already begun voting with their feet and selling up – Rightmove has revealed that almost one in five of homes currently for sale has previously been rented, compared to 8% back in 2010.
But CGT is only the latest travail to have hit UK landlords in recent years – they have already endured the phasing-out of mortgage interest tax relief, tighter rules on tenant evictions, and more onerous safety regulations.
And this gradual squeeze has had unintended consequences which have rippled right through the housing market.
George Osborne poured glue into the housing market when he increased stamp duty and ended landlords’ right to have a mortgage as a tax deductible expense.
George Osborne poured glue into the housing market when he increased stamp duty and ended landlords’ right to have a mortgage as a tax deductible expense.
It did not solve the housing crisis and it has created a really bad environment for renters. There is not enough supply, build to rent has not filled that void, and landlords have just been battered in the press when most of them are providing an excellent service. You have now got dwindling supply and that is a really bad thing.
In Cornwall, Anna Sharp of Black Brick’s country department, is particularly concerned about second home owners, who are simultaneously being hit with Council Tax surcharges, and the end of the furnished holiday lettings tax regime, which had excluded them from the end of interest rate relief.
“All of this is affecting investment buyers,” she warned. “Holiday let bookings are down 37% in Cornwall this year, so change would have occurred naturally. This is forcing a lot of people to sell, but will not solve the housing crisis in Cornwall, because a lot of these homes are priced above £500,000 and local buyers are not able to afford them.”
Non Doms
One change the Government has already confirmed is a dismantling of the Non Dom tax system, which currently allows high net worth individuals to live in the UK and pay tax on their UK income only. Despite this, the latest data shows that in the 2022/23 tax year the 74,000 Non Doms paid, collectively, £8.9bn in tax.
“If we get rid of Non Doms, we are just waving that off,” said Tom Kain, a Partner at Black Brick.
Let’s hope that Rachel Reeves is now finally listening to tax experts. Rumours are that the Chancellor is now considering watering down the changes amid concerns it will raise no money.
Inheritance Tax
The other big issue is IHT, currently charged at 40% of estates worth more than £325,000. In reality, however, there are many exemptions and only 5% of deaths are taxed in the UK, often at much lower rates. Older homeowners have been particularly spooked by the prospect of paying more and, possibly as a result, another trend highlighted by Rightmove has been a surge in the number of large houses for sale. “I definitely saw this trend emerging in the last year of people who probably should have moved in their late 70s and early 80s but had put it off because of the pandemic starting to downsize,” said West Country specialist Rupert Stephenson, of Black Brick’s Country & Coast Department.
“They wanted to quickly pass on their wealth to their children.”
Stamp Duty
Black Brick’s Rupert Stephenson thinks that pushing older homeowners out of their homes with the threat of higher taxes is unfair. A more humane, effective alternative would be to use less stick and more carrot.
Late last month, the Organisation for Economic Co-operation and Development (OECD) called for Stamp Duty, which it argued hinders people from moving to pursue better job opportunities or downsizing, to be scrapped.
Stephenson thinks that getting rid of Stamp Duty for both downsizers and first time buyers would get the property market moving again. “It would be good for the economy as a whole – house builders, white goods purchases, you name it. Downsizers need to be encouraged, but punishing them with tax is social engineering. People want stability, not loads of changes all the time.”
