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Reforms lead to warnings of buy-to-let speculation

Industry experts say the Chancellor’s proposals to scrap taper relief could encourage short-term investing by buy-to-let landlords.

In last week’s pre-Budget report, Alistair Darling also announced plans to introduce an 18 per cent flat rate of capital gains tax.

The reforms will see the rate of CGT increase from 10 to 18 per cent for investors who sell business assets after two years. However, the rate of CGT for landlords who sell their properties will fall to 18 per cent from a minimum of 24 per cent if they owned the property for 10 years or more. Standard Life head of pensions policy John Lawson says: “The changes will encourage people to turn over their buy-to-let properties quicker. People will not take a long view with buy to let. Investors will take the speculative view.”

Beacon Asset Management tax expert Graeme Bone says: “It should be great news for landlords, strictly speaking. People thinking of selling their properties might want to hold off as they will get a better tax deal after April.”

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 are in the market for the long term, seeing their property as an income alternative to a pension.”

The Mortgage Practitioner sole practitioner Danny Lovey says: “To encourage short-term investment will not help anything but I think it is too early to tell. We will not know what the ramifications will be until the detail has been put in.”

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