Protect landlords from CGT rise, says ARLA
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Landlords must be protected from any Capital Gains Tax rise in next week’s budget, says the Association of Residential Letting Agencies.
ARLA is calling on the government to treat private rented property as an ‘entrepreneurial business activity’ for CGT purposes in the upcoming emergency Budget.
Ian Potter, operations manager of ARLA, says: “If rental homes are removed from the sector because of changes to CGT, it will put further strain on an already struggling market and will result in fewer people being able to put a roof over their heads.
“If the government does decide to proceed with increases to CGT, it must be tapered to minimise distortions to the market. We would also like to see rollover relief introduced, so that landlords are not penalised when they a sell a property and purchase another. This measure must be put in place to counter the historic lack of investment in private rental housing.”
ARLA claims the backing of the Council of Mortgage Lenders, the British Property Federation, and the National Landlords Association.
But LSL Property Services believes rising rent takings can help counter the effect of any CGT rise for landlords.
The Buy-to-Let Index from LSL Property Services plc says the average rent rose by a 0.5% to £667 a month which is the fourth successive monthly increase and up 2.7% year on year with last May.
David Brown, commercial director of LSL Property Services, says: “With the government likely to raise capital gains tax, capital gains may no longer be taxed more lightly than rental income.
He adds: “But such a move would at least encourage landlords to take a more balanced view of rental income and capital gains in the sector. Total annual returns are being boosted by strong capital gains, but it is rental income that makes an investment plan viable and pays a landlord’s mortgage.”
Readers' comments (9)
Blink | 19 Jun 2010 7:34 am
Why would there be less homes over peoples heads if CGT is used fairly and is implemented at full value on rental properties? Surely CGT does not mean the houses will be knocked down? Surely people can still live in them? There will be the same number of houses for the same number of people to live in.
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Mike Livingstone | 19 Jun 2010 8:13 am
I don't see that CGT is really that big and issue and really ought to be 40% with no taper relief.
Decent landlords will sensible business plans make their money on the yield, not speculative prices rises.
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Edina Dinde | 19 Jun 2010 9:01 am
Nonsense! When landlords sell someone else will buy the house and either live in it or rent it out!
Unless the population is increasing we don't need a constant stream of extra houses. Currently void property in my town totals many thousands - I don't see a shortage of properties.
There should be no exemption for landlords for CGT!
Given the state of the market - where landlords have been the only ones buying for some times now, they perhaps need to re-think their "investment" strategy and business plan. CGT exemptions should be for those who actually take risks with their capital, create real jobs and increase the GDP of the UK.
Landlordism and BTL have contributed to the decline of Britain over the last few years and it's time they coughed up something to help the country out!
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Lin | 19 Jun 2010 11:32 am
Buy to Let landlords helped to drive up the price of property, if they now sell it will help to bring prices back down to earth. This will help those who have been priced out of the houseing market. Lots of people have been forced to rent and will buy as soon as prices come down. Dont kid youselves that BTL is a service to the community, it is in many cases speculation on the property market and has done a great deal of harm.
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Paul | 19 Jun 2010 11:34 am
And why exactly do we need "... investment in private rental housing"? It isn't investment at all as it is not creating new housing. It is simply outbidding someone else wanting to buy a house to live in and then charging them for the "privilege" of living (more insecurely) in it.
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GEOFFK | 19 Jun 2010 7:37 pm
Landlords are the target,,,,as the housing minister said on thursday"The days of buying a house fro anything but a roof over your head should be over and houses are for living in and not nor should be port of your pension plan,,,,,he is so right....
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Chris | 19 Jun 2010 8:27 pm
"ARLA is calling on the government to treat private rented property as an ‘entrepreneurial business activity’"
This must be a joke surely?
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Nathan Hobbs | 19 Jun 2010 8:54 pm
What's entrepreneurial about borrowing money to buy a house so that someone who would have bought it and lived in it has to pay you money?
Sounds more like speculation and exploitation to me.
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Ancient Wisom...is a mortgage broker in N3. | 21 Jun 2010 1:21 pm
Advantages: Higher tax brackets will lead to stabilisation in the housing market (Professional Buy to Let landlords tend to hold, rather then quick flip and thus deter speculative investors with too much money). It will also discourage 'flipping'.
As stock of property available increases, prices will fall and thereby increasing affordability and hopefully, help more buyers - for residential homes.
Disadvantages: 40-50% taxes on capital gains gains will hit the average earners the hardest and may lead to a faster and greater than expected fall in property prices. This could lead up to the mother of all property crashes, increasing bankruptcies and huge losses for lenders.
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