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PBR: Fears CGT changes could prompt buy-to-let sell off

The Chancellor Alistair Darling has been warned that changes to taper relief could provoke a buy-to let sell off before April next year and potentially undermine house prices.

Experts believe that because buy-to-let investors who have bought a property between 1998 and April next year may face a full tax hit on any gain if they sell after April next year, they may look to sell before then and may not seek another buy-to-let investment.

There have already been warnings that buy to let is propping up the housing market with CML figures showing that lending to buy-to-let investors rose by 37 per cent in the year to August.

Standard Life head of pensions policy John Lawson says: “The changes to capital gains tax will encourage people to turnover their buy-to-let properties quicker. People will not take the long view with buy-to-let. Investors will take the speculative view.”

Mortgage Advice Bureau head of lending Brian Murphy says: “Some buy to let investors may use the change as a get out clause although most landlords though are in the market for the long term, seeing their property as an income alternative to a pension.”

However, The Mortgage Practitioner sole practitioner Danny Lovey says it is too early to tell what effect it is going to have on the market as the proposals have not been cast in stone yet.

He says: “He hasn’t put the full detail in it yet so there is a lot of time before now and April where the Government will be lobbied by a lot of different groups to try and make it more long-term friendly.

“To encourage short term investment will not help anything but I think it’s too early to tell. We won’t know what the ramifications will be until the detail has been put in.”

Paragon managing director John Heron says it is currently consulting accountants to get a better understanding of the proposals.

However he argues that landlords will actually benefit from the Government’s capital gain tax changes pointing out that the lowest tax landlords pay is currently 24 per cent.


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