Government Plans For The UK Economy
This year’s Autumn Statement is due to take place on Wednesday 3 December 2014 at which point Chancellor George Osborne will set out the Government’s plans for the economy based on the latest forecasts from the Office for Budget responsibility. With the General Election looming it’s likely that action will be taken on a number of issues that have been up for debate in recent years, with the Chancellor keen to win an early support from voters. We’ve taken a look at 3 areas likely to play in part in next month’s announcement that will have an impact on the housing market.
Stamp Duty, again: We were all poised for a shake-up of the stamp duty system in this year’s budget however it failed to materialise. Since then there have been increased calls for reforms to the system not least because of the argument that it deters people from buying homes. Stamp Duty currently works on a tiered system with the fee, which is paid when a home is purchased, charged at 1 per cent on properties from £125,000 to £250,000, and at 3 per cent on those up to £500,000. Rates continue to rise to a maximum of 7 per cent on homes over £2 million. Any reform will most likely see the duty changed to work in the same way as income tax where increased tax is paid on amounts over the threshold, not the full amount. This is the system that looks set to be introduced in Scotland in 2015, so it seems likely that we will follow suit.
Capital Gains Tax & buy to let: Wouldn’t it be great if the Chancellor was bold and offered a capital gains tax break on a person’s first Buy to Let. If this reform is introduced this will apply only to the capital gains tax due on the sale of a landlords first Buy to Let property. The tax break will serve to encourage more landlords to sell especially those who have just one Buy to Let and are reluctant to sale due to CGT reducing the profits and therefore the attraction of selling. This brave move it is hoped would help to revitalise the housing market and would free up property that would surely be purchased by first time buyers. A 12 month CGT break for these circumstances would be very welcome!
IHT thresholds to rise? Treasury forecasts suggest that rising house prices and the recovering economy is pushing tens of thousands more people over the £325,000 threshold for paying the duty. It is anticipated that there will be a 35 per cent increase in the number of families required to pay tax on the estates they inherit during this financial year. There have been calls for reform for a number of years but the furthest that the Chancellor has gone so far is to freeze the threshold at 2009 levels until 2018. With the Prime Minster already pledging reform to the system as part of his election manifesto it would seem that an increase to threshold is a dead cert.
Let’s hope 2 out of 3 of these at least are proposed in next weeks Autumn statement!