ARs must plan for January VAT hike

12 July 2010

The spending cuts and tax rises in the emergency Budget fulfilled the well-publicised promises of the previous weeks.

But the hike in Capital Gains Tax to 28% brought a sigh of relief from buy-to-let investors.

While hardly cheering from the rafters landlords at least feel they have escaped the chancellor’s wrath for now.

Unlike entrepreneurs, landlords do not enjoy a spotless reputation among the public. Investors have forced up the price of property and helped push up the age of first-time buyers. The government knows this so landlords are a soft target.

And a flood of new property onto the market could be no bad thing for softening prices and helping first-time buyers.

But if this is a perceived political reality, it’s also a one-sided view. Landlord investment often sparks regeneration in areas that need it.

The CGT rise was as inevitable as it may have been unwanted by property investors. But the big question now is whether this is the end of changes to CGT.

The hike in CGT ran parallel with that in VAT. As taxes go, this is an old Tory favourite - chancellor Geoffrey Howe raised it from 8% to 15% in his 1981 Budget.

This will affect businesses but the pain is delayed until January, presumably to encourage spending by businesses and consumers in the meantime.

But if you are a VAT-paying network member expect a hike in January or start shopping around.

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