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tuggybear

Tax Changes Fuel Great Escape From Buy-to-let

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We did not see this coming.

Buy-to-let investors across the UK are telling estate agents to offload their properties to take advantage of new tax rules. Chancellor Alistair Darling passed up the opportunity in his first Budget to go back on controversial changes to CGT, which means that, from 6 April, landlords will benefit from a much lower tax rate of 18 per cent when selling property.

Cont. : http://www.guardian.co.uk/money/2008/mar/23/property.tax

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Sounds like a repeat of the MIRAS withdrawal that proved to be the tipping point for the 1989 HPC. When will governments learn that this kind of pre-announced tax change can have major unintended consequences? This can only accelerate the declining value of btls as thousands of them hit the market at once. It's MIRAS in reverse - that caused a last-ditch panic buying spree at the end of the last boom followed by a total drop-off in sales; this CGT benefit will cause a mass sell-off at the beginning of a HPC leading to over-supply and depressing prices for months, if not years, to come.

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The removal of multiple MIRAS for a property was announced as to be removed by Lawson in 1988, although I believe 12 months notice was given.

This did create a rush up to March '89 (I bought my 1st house in early '88 so remember it), however, prices were still spiralling up ridiculously through to 1990. It was a factor but not the only one.

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funny how an increase of tax could exacerbate a HPC in 1989, and in 2008, a DECREASE in tax could do the same.

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funny how an increase of tax could exacerbate a HPC in 1989, and in 2008, a DECREASE in tax could do the same.

When you are on a losing streak, as Broon is, anything you do will end up going horribly wrong.

He should face up to the fact that his decade of borrrowing has become a calamity of gigantic proportion and nothing he does to try to shore it up will save his HPI-MEW-BTL miracle from collapse.

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The removal of multiple MIRAS for a property was announced as to be removed by Lawson in 1988, although I believe 12 months notice was given.

This did create a rush up to March '89 (I bought my 1st house in early '88 so remember it), however, prices were still spiralling up ridiculously through to 1990. It was a factor but not the only one.

My memory (rather vivid because of personal circumstances at the time) was that ASKING PRICES may have continued to rise, but sales volume dropped through the floor, creating a sort of "phony war" for 18 months or so before the new reality sunk in.

Er - why does that engender a sense of deja vu all over again??

Edited by cartimandua51

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My memory (rather vivid because of personal circumstances at the time) was that ASKING PRICES may have continued to rise, but sales volume dropped through the floor, creating a sort of "phony war" for 18 months or so before the new reality sunk in.

Er - why does that engender a sense of deja vu all over again??

Good point. Before the wibbly wobbly web though, it was hard to find out what houses had actually sold for without spending money and time at the Land Registry (unless you could get insider information from EAs, solicitors or lenders). The prevelance of information now should prevent the "smoke and mirrors" from EAs giving out the bull**** that we are 'achieving close to asking price' . <_<

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However, not everyone welcomes the change. Tom Entwistle, editor of Landlordzone.com, an online landlords' forum, says the tax reforms may be very disruptive. 'It takes away the incentive for landlords to be long-term investors, which was the principle behind taper relief. Providing property for people to live in ought to be undertaken on a long-term basis.

A BTL is not just for Christmas... I didn't realise the BTL scumbags were being so charitable providing property for people to live in. If there was no BTL we'd all be living in cardbox boxes in shop doorways apparently.

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I like this bit.

'Landlords will be weighing up whether, if they realise their gains now, they will risk missing out on further gains in the medium to long term,' he says.

There is going to be a stampede, maybe.

Trouble is that these people (BTL) are just as ignorant, if not more than the general populus of the situation.

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I like this bit.
'Landlords will be weighing up whether, if they realise their gains now, they will risk missing out on further gains in the medium to long term,' he says.

There is going to be a stampede, maybe.

Trouble is that these people (BTL) are just as ignorant, if not more than the general populus of the situation.

I was led to beleive the inland revenue were going after landlords who were avoiding tax on their income- many were igmorant that their income was taxable. I am sure that most are ignorant of the CGT changes.

In any case, isnt it preferable to get out early in a falling market regardless of tax in most cases? I mean, if you are a BTL and on the ball and see a time ahead when it is thought the market will be awash, get out NOW.

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My memory (rather vivid because of personal circumstances at the time) was that ASKING PRICES may have continued to rise, but sales volume dropped through the floor, creating a sort of "phony war" for 18 months or so before the new reality sunk in.

Er - why does that engender a sense of deja vu all over again??

Exactly so! The pre-announcement of the ending of MIRAS sucked in all would-be purchasers, especially ftbs, for the following 12 months or so. That left a massive black hole where buyers should have been. I saw it coming and downsized while prices were still at their peak, realising most of my equity through buying my next place with just a very small mortgage.

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Not so sure about "realising their gains", for many with more recent city centre flats it will be "realising they weren't quite the entrepreneur they thought they were," and quite possibly, "realising they've just turfed out tenants and forked out for a HIP, haven't had a viewing in 6 months" with the added realisation of "realising they have to cough-up their own cash to pay the mortgage."

Lots and lots of interesting "realising" to be done in next couple of years! :rolleyes:

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funny how an increase of tax could exacerbate a HPC in 1989, and in 2008, a DECREASE in tax could do the same.

Aaah,but as with everything this government does,read the small print.

Investors with properties held for OVER 6 YEARS WILL PAY MORE TAX,due to the abolition of taper relief....that's a reason to sell up.

Investors with properties held for LESS than 4 YEARS WILL PAY LESS TAX....where taper relief would have been 22%+,it's now going to be 18%....INCENTIVE TO SELL

so chaps,we have a double whammy on the sell side...this will accelerate quickly into a monumental slump.

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My memory (rather vivid because of personal circumstances at the time) was that ASKING PRICES may have continued to rise, but sales volume dropped through the floor, creating a sort of "phony war" for 18 months or so before the new reality sunk in.

Er - why does that engender a sense of deja vu all over again??

Hmmm,what like this???

rr.jpg

post-1056-1206269533_thumb.jpg

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If the OP does happen, long term (are there any?) BTL holders will have to weigh up flooding the market and depressing prices and therefore profit against holding onto it a bit longer in the hope :lol: that they will achieve a higher price later. After all, CGT is only liable on profit, if there is any!

If there ARE any LL in it for the long term, I would have thought they won't sell now just because CGT is 18% instead of 40%. There is an annual allowance profit before tax as well but I'm unsure if this can be rolled up (£8k p.a.?) I stand to be corrected.

Edited to say: I was not aware of the 4/6 year thresholds posted by oracle while I was composing this one. There well may be a flood!

Edited by Stourbridge Baggie

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  • 292 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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