Property Investing

In an ideal world, property taxes wouldn’t provide so much of a financial limitation for us property investors, but such wishes rarely enter into existence…

However, I did spot an article today which has given me some hope that the Budget Report tomorrow will present better opportunities for investors.

In this article, the National Landlords Association had essentially asked the government to recognise the importance of the private rental sector; its influence upon the economy and the need to re-evaluate current housing taxes.

And I have to confess that should they occur, it would make for a better market place…

The key 5 they addressed were capital gains tax, VAT, council tax, stamp duty land tax and the ‘Rent-a-Room’ Scheme – all of which play a fundamental role in our investment decisions.

Now if you haven’t already heard about this, here is a quick summary of what the NLA want to come from the 2010 budget report tomorrow:

Capital Gains Tax: At the moment property investors like you and me are excluded from ‘roll-over’ relief which enables us to release capital gains. However, the NLA are proposing that the government remove this rule so we can utilise this roll-over relief to renovate and modernise our property investments.

What does this mean for property investors? You will have more cash to maximise your property lets rental returns and accessibility to tenants.

VAT: The NLA want to reduce the rates for property renovations/home improvements down to the lowest levels possible of just 5%.

What does this mean for property investors? Yes I have to admit that there are currently plenty of provisions available to help property investors bring their property lets to a higher standard, but by lowering rates to just 5% this will present a much more attractive prospect for property investors who haven’t got the cash to renovate.

Council Tax: Now you’re probably already aware that local authorities differ in the amount of council tax their charge which can prove incredibly frustrating when you have got multiple property lets across the country. Under the NLA’s direction, they want the government to provide local authorities with clearer distinctions on how much council tax should be to help prevent further confusion.

What does this mean for property investors? The more uniform council taxes become, the easier it will be for you to maximise affordable and much-needed accommodation for the property market.

Stamp Duty Land Tax: The existing ‘slab system’ is calculated based on fixed rates in arbitrary price bands. The NLA want the government to reform this system as well as enable multiple property investments to be treated as individual properties instead of as bulk transactions.

What does this mean for property investors? If you are the type of property investors who prefers to buy in bulk, you will now be able to save on the cost of stamp duties. The existing problem with buying properties in bulk is that it is easy to end up paying 4% in stamp duties because 5 properties worth £100,000 have passed the threshold. However have the freedom to pay stamp duties on properties individually and in this situation there will be no cost at all.

‘Rent-a-Room’ Scheme: Basing their argument on the same used by the ‘Raise the Roof’ campaign which argues that property owners are being put off from taking lodgers due to the obstacle of having to fill in a tax return form. The NLA believe by simply raising the tax-free threshold from £4,250 to £9,000 a year property owners will feel more inclined to take on lodgers.

What does this mean for property investors? By sharing their properties and leasing them to lodgers, this will help to ease the growing property shortage occurring across the UK.

See what I mean?

Hopefully the government will see sense tomorrow and implement these changes proposed by the NLA. We will just have to wait and see.

Wendy xx