Boris Johnson on the coalition: “cross between a bulldog and a Chihuahua” and a “bright blue tropical fish with yellow dots.” Who can say it better than that?
As David Cameron stood on the threshold of Downing Street last night some landlords could perhaps be forgiven for thinking they had some breathing space following the onslaught of regulatory proposals issued during the final months of the last Government.
Unfortunately, this seems unlikely to be the case, as within hours of taking office rumours of drastic changes to the Capital Gains Tax (CGT) system abound with potentially damaging ramifications for landlords.
According to sources, including the FT and Telegraph, the Conservative/Liberal Democrat agreement includes adoption of the Lib Dem pledge to link CGT and income tax rates. This could see the rate of CGT increase from 18 to 40 or even 50 percent following the ‘Emergency Budget’, expected around 16 June.
Details are sketchy but assuming that the final policy bears resemblance to Lib Dem manifesto pledges we can expect CGT on “enhanced capital value at the same rate as on earned income, not at 18 per cent as at present”.
This is particularly relevant for landlords as residential property falls within the category of ‘non-business’ assets which is largely ignored so far as reliefs and exemptions are concerned.
The consequences of this change could be considerable. Many landlords will need to think very carefully over the coming weeks about their long term investment plans, and those considering selling some properties would be forgiven for acting quickly before it comes into force.
It provides no recognition that letting property is a business for landlords and that such a tax increase would provide huge barrier to crucial future investment in housing.