ICS Property Tax Report, March 2016
Report into Britain’s property taxes reveals that taxation reform could be key to tackling housing crisis
- Reform of Capital Gains Tax could allow 100,000 private tenants to own rented homes
- Current tax system is a disincentive for landlords looking to sell their properties
- Tax relief should be given to landlords selling properties to existing tenants
The Chancellor should help generation rent to own their current properties through the reform of Capital Gains Tax according to a new report by the Royal Institution of Chartered Surveyors (RICS).
The RICS Property Tax Report says that the Chancellor should use his budget to deliver and then stick to a clear property tax policy, to give private tenants, home buyers and investors the clarity, certainty and predictability they need for future stability and growth.
Tamara Hooper, RICS Policy Manager, South of England, said, “The Government has changed its policies around property taxes more often than the Chancellor has been pictured in a hard hat. That has resulted in uncertainty in the property market. What we need is a period of stability and we would call on the Government to set a course and see it through. This budget, the Chancellor is due to announce his new business tax roadmap, it is critical that property taxes are included in this plan.”
The report identifies and proposes solutions for the UK’s most unworkable property taxes. Capital Gains Tax (CGT) is identified as one of the country’s least effective taxes for delivering the Government’s housing and property policies.
Buy-to-let investors are liable for CGT whenever they sell their property, which is often perceived to be a barrier to the release of available homes on to the market. Recent research from the Residential Landlords Association suggested that 77% of private landlords would consider selling their property to tenants if the tax liability was waived.
Given the Government’s focus on home ownership, RICS recommends one way that homes could be delivered is if the UK’s 3.84m private landlords were incentivised to sell to existing tenants. If just a fraction were encouraged to sell at affordable rates, thousands of new homes could potentially be released onto the market. Further incentives could then be provided to encourage the seller to invest in further rental properties.
Ros Rowe, Chair of the RICS Taxation Policy Panel Group, said, “By removing Capital Gains Tax for landlords the Government could find a solution to the housing crisis that it has been so keen to address. Houses could be released to private tenants with the funds reinvested in more homes.”
The report recommends that the proposed change to Capital Gains Tax should be the carrot that encourages landlords to sell their properties and reinvest in the rental market. However, RICS feels that the new Stamp Duty increase for buy-to-let investors is a disincentive to the expansion of the much-needed Private Rental Sector (PRS). As such, the report is calling for the Stamp Duty increase to be waived for large institutionalised landlords to encourage the growth of the professional PRS.