Tax allowance cuts 'a small hit to landlords, and easily absorbed'

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Tax allowance cuts 'a small hit to landlords, and easily absorbed'

The senior adviser at London Mortgage Partners says the chancellor has made changes "in the best places" and the mortgage market has responded positively – some rates have even come down since.

The new government has announced a number of stealth taxes and spending cuts, including cuts to the capital gains tax allowance and a decision to sunset the previous government’s stamp duty cuts – though they will remain in place until March 2025.

Some in the industry have warned that in the buy-to-let space such policies could effect an exodus of landlords who see their profits dwindle further and try to sell up before being stung by higher CGT.

But in a Q&A with FTAdviser In Focus, Gissing explains why he believes this will not be the case.

David Gissing is a senior mortgage adviser at London Mortgage Partners

 

 

 

We’ve had nearly a week to digest the changes, and so far the market is still showing great confidence.

 

 

FTA: What did you make of the Autumn Statement as a whole? 

DG: Overall I thought the budget was positive and mostly expected, with no surprises. It has been mostly well received by the mortgage market, with no impact on rates. In fact we have seen rates continue to come down this week.

FTA: For the housing market we have seen a commitment to keep Kwasi Kwarteng’s stamp duty cuts until March 2025 on the one hand, but cuts to dividend and CGT allowances on the other. What effect will these have on the market?

DG: Keeping the stamp duty cuts makes the entry point to the market slightly easier for first time buyers and reduces costs for people moving home – this will benefit the south and south east the most.

Dividend and CGT cuts further squeeze some landlord profits, but will only see a small amount of extra tax when withdrawing profits. CGT will reduce profits on sale of the asset only.

FTA: What will the chancellor’s temporary commitment to the stamp duty cut mean for home buyers and house prices?

DG: This may encourage people to move or buy, which in turn should contribute to keeping prices up. However, I think the [previous chancellor's] increase to the SDLT thresholds have been long overdue. 

FTA: Landlords will be particularly affected by the dividend and CGT measures. Do you foresee an exodus from the BTL property market?

DG: No. The reduction in these allowances will reduce profits, but not by a significant amount to any individual.

It could deter new landlords, as it squeezes margins slightly more and we may see some who want to exit if their yields are tight, but for the majority it will be a small hit and easily absorbed.

The changes are needed and I think they’ve been made in the best places.

More landlords have and will exit due to legislation changes to the private rented sector and tax changes previously implemented by George Osborne.

FTA: What will be the impact on the rental sector?

DG: Minimal impact, but potentially less stock available for let.

FTA: What might the Autumn Statement mean for mortgage rates?

DG: The changes are needed and I think they’ve been made in the best places, without having too much impact on the average person.

We’ve had nearly a week to digest the changes and so far – the market is still showing great confidence. Swap rates and fixed rates are still reducing, albeit slowly – it is moving in the right direction. Variables may still go up in the short term.

FTA: What other issues would you have liked the chancellor to address?

DG: None – too much change brings uncertainty, which can impact the market negatively. 

FTA: What should the government be watching closely when it comes to mortgages and housing between now and the next Budget?

DG: Ensuring rates continue to reduce and are then maintained at a sustainable level, by controlling the economy and ensuring stability. 

FTA: What do you want to see in the next Budget?

DG: To further address the cost of living and energy crisis.

carmen.reichman@ft.com