Purely Mortgages pre-Budget wish list
He calls for the following:
Stamp duty threshold to be raised to £200,000 to kick start first time buyers
Stamp duty should be a progressive tax, not a step function
Principal private residences to be exempt from inheritance tax
Restructure CGT on residential housing
“I am sure Gordon Brown isn’t worried at all by the Bank of England’s latest figures, showing the mortgage market at a 4 year low for new advances in October. However, the reality is that the housing market and notably first time buyers need some form of stimulus from the budget, whilst Gordon Brown is faced with, in real terms, a massive budgetary deficit, to which the only answer is a substantial increases in taxes.
“The likely line is that the figures will yet again be massaged to demonstrate that with extremely optimistic growth forecasts, there is no need in this pre-election pre-budget announcement to increase the tax burden. He needs however to appeal to middle England and I expect in the housing sector this will take two forms.
“First is to address the Inheritance Tax issue relating to housing. The arguments have already been put forward on this one and I anticipate that he will come up with a relief that at least is cosmetically appealing to the electorate – possibly knowing his enthusiasm for complexity, some form of indexation of house price relief, such that only super inflationary growth (i.e. at the top end of the market) will fall within the Inheritance Tax burden.
“I also expect some form of relief for first time buyers. Although the industry is continuing to push for stamp duty relief, I believe this is unlikely. It’s more likely that he will produce the outline of some form of government funded joint ownership scheme. The benefit of this being that it is purely a deferral of the government liability, rather than an absolute cost to the Exchequer.
Purely Mortgages Budget Wish List
“Even these predictions may be hopeful in the extreme. For a real wish list, he does need to urgently address stamp duty. First the threshold should be raised to £200,000, to really kick start the first time buyer market.
“Secondly, the tax should be transformed into a progressive, rather than a step function, tax so that the artificial breaks that we see in the market at the stamp duty price points disappear. This prevents all the wrangling about anti-avoidance schemes and the whole package can be done at no cost to the Exchequer, possibly by increasing slightly the progressive take at the middle and top ends of the market. This should appear as a fairer structure for all.
“Thirdly, I would like to see principal private residences taken out of inheritance tax totally. With the pensions time bomb about to hit and individuals having to look to their property wealth for any number of different and conflicting funding uses, this inflation windfall tax is a burden too far.
“Lastly and most radically, I would like to see a restructuring of CGT on residential housing; there are massive inequalities in the system currently, caused by the principal private residence rule. This means that the single owner of a £5m home can get a massive tax free gain, whilst the owner of a £200,000 home, with either a second home or a buy to let of a similar amount, suffers CGT on the second property.
“Equally the scheme acts as a disincentive to marriage, since the principal private residence is not personal but linked to married couples. I would throw all this away and allow each individual to have an indexed lifetime CGT relief on residential property. There would be no limit on the number of properties and the cap could initially be set at a politically acceptable level of £1m. There are interesting parallels here with the pension cap and such a scheme would be a vote winner in middle England, along with producing a much fairer environment.
“Most of this however, is just blue sky. Probably all we’ll get is some tinkering with the Home Information Pack legislation and some new rules on usurious lending.”