Fresh Invest Logo

Fresh Invests property investment blog

Posts tagged “property tax

What will the election mean to the property market?

3 political partiesThis election could mean boom or bust to the already fragile property market in the UK.

As we all know, possibly the largest challenge facing the new government will be our economy. The 3 big parties have outlined the steps they will take to try to deal with the £170bn deficit in the UK’s finances.

With it looking increasingly like a hung parliament, what will be the main points of debate from these parties on our property market?

Listed below are some of the key points of each party.

Conservative:

  • Scrap home information packs
  • Keep the £250,000 stamp duty threshold for the foreseeable future
  • Add a new 5% stamp duty threshold for £1m properties from April 2011
  • Increase inheritance tax threshold to £1m
  • Regards Northern Rock, they have not stated whether they will consider remutualisation
  • Include more local initiatives rather than large scale regional building plans
  • Will look to split state and part owned banks into 2 parts, retail and investment

Labour:

  • Add a new 5% stamp duty threshold for £1m properties from April 2011
  • Keep the homebuyer direct scheme for low earners
  • Keep Home Information Packs
  • The £250,000 stamp duty threshold is due to expire in March 2012
  • 10,000 affordable homes to be built a year by 2014
  • Northern Rock: Manifesto pledge to consider remutualisation as an option, ‘while ensuring the sale generates maximum value for the taxpayer.’
  • Will look to break up large banks but probably not into retail and investment
  • Maintain the standard interest rate on the Support for Mortgage Interest Scheme at 6.08 per cent until December 2010.

Liberal Democrats:

  • Charge VAT on new homes
  • 1% “supertax” on homeowners with properties worth over £2m.
  • Create a new “Safe Start” mortgage that keeps buyers from slipping into negative equity
  • Propose a green loan for people to invest in home energy efficiency and micro-renewables
  • Get rid of home information packs and keep energy performance certificates
  • Consider remutualisation regards Northern Rock
  • Will split state and part owned banks into retail and investment
  • Concentrate on local rather than large regional building plans.

Fresh Invest is a property investment company with the aim of maximising our investor’s funds whilst minimising their risk. For more information see www.freshinvest.co.uk or phone 0800 043 69 56.


Thinking about investing in multiple units?

Finally a sensible policy for the purchase of multiple properties has been mentioned by the government, which should give the buy to let market a boost.

Rather than buy to let investors paying stamp duty for an entire bulk purchase, the government is looking at charging bulk buyers per individual property. Because of this, bulk purchasers of property are more likely to stay below thresholds for higher stamp duty rates.

Current stamp duty rates are as follows:

£125,000 – £250,000 = 1%

£250,000 – £500,000 = 3%

£500,000+ = 4%

See below for some figures on how this new policy would help you if you are looking to purchase multiple properties.

The current figures:

10 properties @ £150,000 = £1,500,000

Current stamp duty bill = £60,000

Anticipated figures:

10 properties @ £150,000 = £1,500,000

Anticipated stamp duty bill = £15,000

As you can see, on this particular transaction you would be saving 75% from your stamp duty tax bill!

Another new policy from the government could lead to barriers for Real Estate Investment Trust’s being lifted, this would allow REIT’s to invest in residential property and owners would hold shares in actual bricks and mortar rather than the REIT itself.

For a list of our bulk investment opportunities see here

See the article in The Times here


Recent tax and legislation – How it affects the investor?

Empty rates taxation:

Central government still ignore property industry protestation, about the demolition of perfectly usable premises, to avoid Empty Rate charges.

Non domestic rates are collected by local government, but remitted to central government. This tax has been left in place during one of the world’s worst recessionary periods. Due to this lots of companies have folded and Chartered Surveyors have reported a 65% rise in available floor space.

The government have seen a massive drop in Stamp duty income while the housing market ground to a halt. I guess to recoup some of that lost tax income; they will remove the empty rate exemption for commercial property shooting themselves in the foot. Why?  Many commercial property owners would rather demolish a building with little or no chance of a letting for several years than pay the rates. I expect the government call it “government led rejuvenation” or some such spin.

What this means for the investor:

In reality usable stock is being demolished. Local authority planners should bend over backwards to assist property owners to find alternative uses, before industrial and warehouse estates are raised to the ground, offices are turned to residential units and the High Street looks bombed out.
Residential landlord registration:

The government are considering the compulsory registration for all residential landlords. ARLA (association of residential letting agents) also suggest that to protect landlord’s rents and tenant’s deposits all letting agents should be registered. The scheme is designed to safeguard the tenant’s initial holding deposit and to act to resolve disputes concerning the deposit.

There are a growing number of unregulated letting agents who go out of business with the resultant loss of monies belonging to landlords and tenants. Most older recognised institutions, like the RICS have in place regulations to protect client’s monies.

What this means for the investor:

A more even playing field between regulated and unregulated agents and registered and unregistered landlords can only improve the market and make it more transparent.
If you are the landlord dealing with deposits, you must protect monies that do not belong to you and if you cannot satisfy the prospective tenant that deposit monies are protected, then you may lose a letting.

Tenants will be more inclined to go to the private investor managing his/her own property as they are offered protection for the deposit that will be required and a fair way to resolve disputes that effect the level of returned deposit.