Capital Gains Tax
The rate of capital gains tax for higher-rate taxpayers will rise to 28 per cent from 18 per cent from midnight today, a change that is designed to stop higher earners from paying less tax by converting their earnings to assets. The change is expected to raise £1 billion a year; those who pay income tax at the basic rate will continue to pay the current CGT rate.
Stuart Law, chief executive of Assetz, says: “Osborne’s CGT increase to 28 per cent remains lower than the rates we had three years ago, of up to 40 per cent, before Labour introduced the 18 per cent rate. This move is not likely to have a negative impact on the UK property market as speculative investors are unlikely to sell off their buy-to-let property once this new tax rate is introduced at midnight tonight.”
VAT
VAT wll rise from 17.5 per cent to 20 per cent but this will not include new housing. Liz Peace, chief executive of the British Property Federation, says: “Housebuilders will welcome the fact that they have avoided a VAT rise, despite the Lib Dem manifesto suggesting it could have been a possibility. Doing this would have been disastrous for the housing market.
“However, the VAT hike will put more pressure on retailers and with 12.6 per cent of shops standing empty, we could see more damage done to the high street. What this means for landlords of shops is that they will see further downward pressure on rents, which will mean less cash for new development and investment in deprived areas.”
Holiday lettings
The tax on holiday lets is to be scrapped. This means that landlords who let out holiday accommodation will be able to offset the cost of furniture and fittings against tax. They will also pay reduced CGT when they sell. The Tourism Alliance had warned that Labour’s decision to repeal the furnished holiday lettings rule risked 4,500 jobs.
Housing benefit
Housing benefit is to be cut by £1.8 billion by the end of this parliament. The measures include benefit being limited to a maximum of £400 per week for a four-bedroom or larger house. Liz Peace, chief executive of the British Property Federation, says: “Cutting the housing benefits bill is long overdue and we have long said that housing payments need to again be made directly to landlords to avoid the money being taken by tenants and spent on other things.”
Council Tax
The government will help low-spending councils in England to freeze council tax for one year from April 2011.
Regions
Regional differences have widened during the downturn and nowhere is this clearer than property prices. The Government will publish a White Paper on tackling regional economic differences in Britain later in the summer and will also establish a Regional Growth Fund to provide finance for regional capital projects over the next two years. Anyone setting up a new business outside London, the South East and the Eastern region will be exempt from £5,000 of NI payments for the first ten workers.
Mr Osborne also said he would commit to the upgrade of the Tyne and Wear Metro, extension of the Manchester Metrolink, redevelopment of Birmingham New Street station, improvements to the rail lines to Sheffield and between Liverpool and Leeds.
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You can also read The Times live blog on the Budget (click here).