Buy to let investors could start selling up the mortgage market could feel the affects, if proposed plans by the new Chancellor George Osborne go ahead and capital gains tax rises to as much as 50 per cent.
In 50 days, George Osborne has to announce an emergency budget in which he intends to raise capital gains tax from 18 per cent to 40 or even 50 per cent, in order to pay for the increase in the Income Tax threshold to £10,000.
At a time when the property market is still in the early stages of recovery following the housing crash, this will come as unwelcome news for the buy to let sector, as rental properties will flood the already flat sales market.
The National Landlords' Association (NLA) has called on the Government to exclude residential landlords from the new capital gains tax, along with the exemptions that will be allowed to business assets.
Investment in residential property should be encouraged, said the NLA in a statement, and the new capital gains tax will "act as a significant disincentive for landlords considering further investment."
There is a wide range of exemptions for the new CGT threshold, the NLA argues, such as entrepreneurs and other businesses, so it is calling for the sale of residential property to also be exempt.
“When landlords let property they are running a lettings business. Today, we are calling on the Government to ensure profits from this business activity are included as part of the exemptions," said David Salusbury, chairman of the NLA.
The capital gains tax increase will act as a "barrier to further investment" at a time when there in an "urgent need" for more housing, he argued.
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