Subsidies to buy-to-let give first-time buyers no chance

Most ideas involve some form of subsidy because it is easier for politicians to spend our money than to come up with original ideas.

The Conservatives want to extend right-to-buy in what Labour claims is a £4.5bn unfunded pledge.

Labour wants to force banks or building societies to invest money from help-to-buy Isas into house building. An interesting idea that – getting building societies to invest in building.

The Lib Dems want to build 300,000 homes a year and run a “rent-to-own” scheme.

But none has tackled one of the key issues facing first-time buyers. Whenever they spot a nice new flat or a run down old property that would make an ideal starter home they can face competition from buy-to-let investors.

And, as I have pointed out before, the two groups are not competing on a level playing field.

Investors inevitably have deeper pockets and get tax relief on mortgage interest which first-time buyers do not.

Investors get tax relief on mortgage interest which first-time buyers do not

This can make a tremendous difference to affordability – especially as first-time buyers rarely get the cheapest mortgage deals because they do not have a large enough deposit.

Instead they have to rent from the very people who have outbid them to buy the property.

These subsidies to the buy-to-let market are becoming indefensible. We now have a situation where the top rate of tax on a pension gain is 55 per cent, while the top rate on a property gain is 28 per cent.

Compare this to inheritance tax – another form of capital gains tax on homes – which is charged at 40 per cent. This is almost half as much again as the maximum CGT rate.

Those letting a property also receive reliefs to reduce the gain even before they use their CGT allowance.

It is really no wonder that research by The Wriglesworth Consultancy suggests returns on buy-to-let easily outstripped other asset classes over the past 18 years.

When buy-to-let became mainstream in 1996 it was dismissed by many as a high-risk venture.

Instead, tax incentives and housing shortages have turned it into one of the surest investments.

And while tax incentives have been stripped back on investment Isas and pensions, the perks of buy-to-let have remained untouched.

Do not get me wrong. I am all for tax incentives for investors if properly distributed.

But it seems bizarre that the politicians who constantly talk about the struggles of first-time buyers consistently fail to see evidence that is right in front of their noses.

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Client waivers for wavering IFAs

The Personal Finance Society has raised the important issue of how advisers should react when clients are insistent about taking pension cash against their advice.

Could the day arrive when advisers are given guarantees that they will not face future action if they assist in processing such transactions?

The upside for both parties is clear. Stubborn clients would get the help they need and would be less likely to fall prey to conmen.

Advisers could charge a fee and demand clients sign a clearly worded waiver saying they were choosing to ignore advice.

But I fear the risks would all be with the adviser, who could still face potential future claims from clients claiming they did not realise what they were doing or signing.

Even if a future government did put some form of adviser protection in place I would expect most to steer clear of this particular minefield.

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I’ve taken a shine to my solar panels

As I look out on a bright April day I am hoping for a barbecue summer – not because I am fond of burnt sausages and burger, but because I have become very attached to my solar panels.

So far I have made about £235 from generation and feed-in tariffs through mainly winter months.

I calculate I have also saved about £100 on my energy bills. So that is about £335 so far on an investment of just over £6,000, which is not a bad start.

I went into this expecting a long-term return better than I would get on a savings account, and more secure than I could get with shares.

I have received a mixed reaction from readers, including considerable criticism because of the subsidies.

But to me these incentives are no different from those on pensions, Isas or buy-to-let – so I see no reason why I should not take advantage of them.