Top 30 advisory firm, Bishop Fleming, says residential landlords who want to downsize their property portfolios because of the government’s recent tax changes, should be helped by the Chancellor to do so as part of a wider policy to make more homes available to buy.

The firm, which delivers accounting, tax, corporate, restructuring and advisory services to businesses and private wealth advice to individuals, is calling for the Autumn Budget to make it easier for landlords who have been hit by a succession of tax hikes and who now wish to sell, to do so.

Bishop Fleming’s Head of Tax, Andrew Browne, said the government was taxing landlords out of the rental market through a cap on mortgage tax relief, a 3 per cent stamp duty surcharge and the withdrawal of a “wear and tear” allowance. Landlords have also recently seen more stringent mortgage lending criteria introduced.

Mr. Browne commented: “These recent changes are designed to hit private landlords, but what the government has not done is to make it easier for those landlords to downsize their portfolios, or leave the sector completely, without incurring massive tax penalties; it has been all stick and no carrot from the Chancellor.”

He explained: “Landlords face a Capital Gains Tax (CGT) bill of up to 28 per cent on any gains they make on the selling of properties, without any relief for the time a property has been held, or for inflation.” 

In the past, any gains would have been tapered depending on the length of ownership, and any increase in value purely through inflation would have been removed with an indexation allowance. Both these reliefs have been removed by successive governments, though indexation relief continues to be available to companies.

Mr. Browne commented: “The removal of taper and indexation reliefs has created a punitive retrospective tax on private landlords who may have bought their properties many decades ago. Inflationary pressures are outside the control of landlords, so it is unfair that they should not get some measure of relief from gains that have arisen simply through inflation.  

The Bishop Fleming partner suggested these reliefs could be reintroduced, alongside some further measures the Chancellor could announce, such as giving residential landlords the same access to ‘roll-over’ relief that other businesses enjoy to allow sale proceeds to be reinvested to defer a large tax bill, or to widen the scope of Entrepreneurs’ Relief that reduces the CGT rate to 10 per cent.

Mr. Browne pointed out that low interest rates had allowed homeowners to pay significantly less in mortgage interest than those paying rent, so if the government really wants to help young people on to the property ladder, it needs to combine recent disincentives in the buy-to-let market with fulfilling its promise to make more housing available to buy. It can use the tax system to help achieve this, he explained.

 
 
 
 
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