Speculation mounts on Capital Gains Tax as Budget day approaches
In 1947 then Chancellor of the Exchequer, Hugh Dalton, resigned from the Cabinet because news of his Budget statement was published before he had finished delivering his speech. Dalton had told John Carvel of the London evening paper ‘the Star’ the main points of his speech, shortly before announcing them at the Despatch Box, which was enough in the context of mid-20th century politics to lose the Treasury man the keys to Number 11.
Fast forward almost 80 years and it feels like we know the contents of Gladstone’s famous red box weeks ahead of every fiscal event, with Treasury ministers, advisors, and even ministers, testing potential policies on the public via the press and social media day-after-day in the run up to the Budget.
On that basis, 2024 is certainly no exception. Although this last week has felt a little different, with speculation appearing to firm-up somewhat. Albeit not thanks to any confirmation or denials from Downing St.
Rumour
From a landlord’s perspective there has been a lot of rumour over recent weeks, much of which it is probably safe to ignore, but the last seven days have seen some very interesting reporting. Most likely a result of briefing from 1 Horse Guards Road in SW1A.
Most notable is almost certainly the story to run in the Times on Wednesday. Since the election it has been the received wisdom that Rachael Reeves intends to hike Capital Gains Tax (CGT), with many reports suggesting that rates could achieve parity with Income Tax Bans at 20, 40, and 45% respectively.
This would, obviously, be disastrous for landlords planning to sell in the future as it would devastate any prospect of realising long-term gains.
However, the Times was apparently told – we assume by a Treasury source – that whilst CGT rates will rise, they will not be increased for residential property sales.
The story coincided with coverage in the Guardian of data suggesting that almost one in five properties for sale in September had previously been let in the PRS. The headline: UK landlords rush to sell amid fears of capital gains tax rise in budget summed up the risk facing the Treasury after months of pitch-rolling and dour forecasts; a sentiment reflected in coverage in the Telegraph.
Positive sign
Whilst a far way short of introducing a genuinely pro-investment policy to drive growth in the supply in homes, this is a positive sign that the Chancellor recognises the risk and potential costs of hiking rates for landlords.
As we said in our letter to Rachael Reeves earlier in the week, the tax system should be a tool to boost supply, not further restrict it.
The media’s focus has not been limited to CGT however.
On Friday the Times, again, reported that the current increase in the Stamp Duty threshold will not be extended. This isn’t landlord specific and doesn’t even reference the damage done by the additional property levy – but it does seem to have sparked debate about the efficacy of the SDLT, with ‘property guru’ Kirstie Allsopp highlighting its complexity and describing it as a ‘monster’ and a ‘dead tax’.
The NRLA is not alone in calling for significant reform of the pervasive transaction tax.
Inheritance Tax
Finally, Budget speculation wouldn’t be complete without the perennial reference to Inheritance Tax (IHT). The I reported that several reforms could be on the way in Ms Reeves first Budget, with cuts to the nil-rate band dragging more estates into scope of the notoriously unpopular tax, and restrictions on gifting likely to catch-out those trying to pass on assets in life.
With less than two weeks to go until the Chancellor confirms exactly what she has in store for the country’s finances we don’t have long to wait to find out which rumours were worth listening to. In the meantime, we will continue to make the case for incentives to invest and highligh the danger of further depressing investor confidence in our market.
For analysis and reaction to the Budget members can sign-up to our Budget Special webinar on Friday the 1st of November.
