More money squeezed out of BTL buyers

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The government has in recent months belatedly woken up to the distorting effect that buy-to-let has had on the housing market.

But does the 3 per cent stamp duty premium on buy-to-let and second homes have anything to do with fairness? Or is it just another tax-raising exercise?

The answer is surely contained in the extra £3.8bn this change is expected to raise.

If first-time buyers were truly at the heart of the issue then surely the money raised would be ring-fenced for measures to help them.

George Osborne dressed the measure up as doing something about the cash buyers who were snapping up properties to let or as second homes. Overseas buyers may have been his intended target, but plenty of UK buyers will be ensnared.

But what are the justifications for this? We do not add extra tax to people who choose to buy a second car or take four holidays a year instead of one.

“We do not add extra tax to people who choose to buy a second car or take four holidays a year instead of one” Tony Hazell

We do not tax people for sending a second or third child to private school.

These are choices people can make with money they have accumulated. Second home buyers already pay stamp duty, and can face the prospect of capital gains tax when they sell up. They pay extra council tax and will pay an insurance premium tax on their household insurance, so there is little justification for this stamp duty hike.

My argument on buy-to-let has always been that those using it as an investment were receiving unfair subsidies in the form of tax relief on mortgage interest and were entitled to claim tax relief on refurbishment which may never take place.

I firmly believe that an even playing field must exist between those buying to nest and those buying to invest. But I do not agree with the attempt to dissuade people from buying a second home by increasing stamp duty.

Let us not forget that the growth of buy-to-let stemmed from a desire to create an active private rented sector. This was so phenomenally successful that it became the investment of choice for many. But with first-time buyers squeezed out, the balance needed redressing.

Now the chancellor has sent a message that second home purchasing is anti-social and undesirable. Some who live in Cotswold villages may agree with that sentiment.

But plenty of homes taken by second home buyers would never prove attractive to first-time buyers.

This feels like a blunt instrument wielded indiscriminately rather than a honed piece of financial legislation designed to achieve a specific goal.

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A step in the right direction

The Financial Services Compensation Scheme wants to allow claims from trustees of pension schemes with larger employers.

As more employees are auto-enrolled it seems fair that they have similar protection to that offered to those who work at smaller employers.

The nature of the schemes means that the employer is not making any guarantees. Therefore it makes sense for them to be pulled under the protection of the FSCS.

But why put the cost of this – estimated at £640,000 to £5m a year – solely on investment, pension and life intermediaries? Surely the cost could be spread across the whole of the pension industry, thereby making it more manageable and palatable.

The FSCS appears to be going through a spell of introspection.

We have heard talk of a risk-based approach to funding and of the need to raise consumer awareness of compensation for poor advice.

These are potentially positive moves from an organisation that has at times in the past disappointed both consumers and the industry.

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Ee, by gum!

I was under the impression that you could always rely on the folk of Yorkshire to show common sense. Well, it seems to have escaped the eponymously named building society.

A Fos case saw Yorkshire Building Society being told it must convert a 25-year mortgage to a lifetime loan.

The borrower had taken the loan at age 73, and faced being asked to sell up and move when he was 98.

Instead of taking the sensible course of action, Yorkshire took the case to the ombudsman.

The ombudsman encapsulated nicely: “This is about whether it is fair to expect someone to sell up and move house at age 98, and to spend the 15 years in between worrying about doing so. It isn’t.”

Yorkshire has been told it must not seek to enforce its mortgage during the customer’s lifetime, and must recover the money from the net sale of proceeds when it is sold.

Now that is common sense.

Tony Hazell writes for the Daily Mail’s Money Mail section