I must say that we should never under estimate the great British public’s insatiable appetite for residential property which has continued unabated, certainly since the 80s, and was assisted by Margaret Thatcher’s reforms of council houses thereby releasing many of these into private ownership.
This is in sharp contrast to France or Germany where, instinctively, the Public choose to rent their homes releasing more money for consumer spending, and so, there is no real interest in the appreciation or investment value of private property.
With present low interest rates for mortgages the widespread renting of residential property in the UK would be a foolhardy pursuit since the consumer would not benefit from any tax free capital gain that takes place over time.
One of the reasons why there is disparity between rich and poor, with the latter becoming all the more so, is the ownership of assets. Over time, these have been a very good investment, however, those who are simply relying upon salary, who do not have assets, have suffered greatly.
The main home not only serves as a sanctuary for the family and a quasi pension for old age but also a nest egg to provide the offspring with a deposit to get onto the property ladder.
So, it is a welcomed initiative for the Tory Party to ring fence Inheritance Tax exemptions up to £1million per household, thereby, allowing parents to pass on their treasured asset in a tax efficient way after their death to their descendants.
This makes perfect sense, you pay your taxes during your lifetime (both direct and indirect) and why should you pay a further substantial amount on death when the government cannot provide any further services for you? This is an unacceptable fiscal intrusion into a very private place where is doesn’t belong.
Thank goodness the Tory Party has had the courage to ‘come out of the cupboard’ and say so whilst the opposition parties are still trying to fan the flames of class war and court popularism.
In order to fund the further £175,000, per individual tax give-away, they are proposing to further limit the private pension contributions at the higher end of the earnings scale.
The reason why there has been an explosion of Buy-to-Lets as a source of income and capital growth is that successive governments have continually attacked this pension facility such that it will soon not be worth having.
Our esteemed former Chancellor (?) Gordon Brown took away the Tax Credits from the Pension companies that held back the FTSE for five years during his reign and was one of the reasons why there are so many gaping holes in corporate pension schemes although this was exacerbated by guaranteed lifetime payouts.
Private Pensions contributions are easy picking for Chancellors to both raise money and be seen to be punishing the wealthy. The Tory Party is continuing this tradition, in order to fund this tax giveaway.
I agree whole heartedly with this proposal, but don’t then moan about the shortage of private housing in London and the UK, when even more people choose Buy-to-Let investments and, therefore, deprive the first time buyer from a home of their own. You can’t have it both ways.
Written by Trevor Abrahmsohn.
Follow Trevor on Twitter.