The first rumour was about an Exit Tax to try to stem the torrent of some 16,000 non-dom millionaires fleeing these shores for more welcoming fiscal climes elsewhere in the world, which would be as effective as a ‘perforated male contraceptive device’!
The second rumour is about getting rid of the tax free seven-year gift allowance, which bypasses Inheritance Tax (IHT). This would also be as useful as a ‘chocolate fireguard’ to the accident-prone government, since everyone would stop gifting assets to their children and therefore, no money would be raised as a result. Yes, it would add to the IHT take in the end, but this could be in 10-20 years time and certainly not much use to an incompetent Chancellor, urgently trying to raise some emergency monies, to fill the £50billion hole in her autumn Budget.
The third rumour is the reform of the Council Tax Bands, which have not been revalued since the early 90s. These raise money for the local councils and therefore are not much use to the debt-ridden Treasury. In principle, I do not have a problem with this. If the changes to these Bands are not draconian, I don’t think that the relevant property market will be much affected by these.
The fourth rumour is that they are going to abolish Stamp Duty in favour of, effectively, a ‘Mansion Tax’, which this time will raise money for the Exchequer (not the local councils) if it ever is implemented.
More class action/s than a school full of St Trinian’s
The bad news, however, is that every property in the land needs to be properly valued, which will take glacial time to organise, and you can only imagine the avalanche of ‘push back’ in the courts from angry homeowners who feel aggrieved and intend to contest the valuations, whilst they freeze their payments until the litigation process is finally determined.
Low and behold, there will be more Class Action/s than a school full of St Trinian’s on a bender!
Cash poor, widowed grannies
The cash poor, widowed grannies, who may have bought their properties 40/50 years ago will not appreciate a growing debt on their estate from deferred Mansion Taxes which, together with IHT liability when they die, could wipe out a significant amount of equity for their descendants.
In any event, if these people have made sacrifices throughout their lives in order to build up a nest egg from tax paid money, only to find the balance being taxed twice again, I wish the Chancellor luck surviving the inevitable moral tsunami this will create.
The fifth and final rumour, is to impose Capital Gains Tax (CGT) on the sale of one’s personal, private, property. This has been ‘sacred ground’ for countless previous governments of all persuasions and always dismissed as being unworkable and de facto, political suicide, particularly amongst the middle classes.
Terminal constipation
If anyone thought that the eyewatering levels of Stamp Duty Tax asphyxiated the housing market, CGT will create terminal constipation as homeowners will be very reluctant to trigger this liability for themselves, unless they are absolutely desperate to sell.
I am sure that the ‘tin eared’ Chancellor would never think about the capital losses that would be claimed if anyone lost money on their house purchase.
If this Tax is imposed it would certainly not produce the monies needed immediately for the Exchequer and therefore, would be another imposition, driven by politics of envy, alongside the VAT on schools and the non-dom changes.
If Rachel Reeves thinks she is on a naughty step now, it will be hallowed ground by the time she has finished these reforms!
A shot of adrenaline
Perversely enough, getting rid of Stamp Duty, which is clearly a transaction tax, will give the Residential Property Market a shot of adrenaline where activity and values will surge exponentially. A runaway property market will exacerbate inflation and further disenfranchise the vulnerable trying to get a ‘leg-up’ on the property ladder.
Even though these could be groundless rumours, some consumers are holding back from purchasing a property, just in case they have traction.
Personally, I am not against a reform of the Stamp Duty Tax which has held back the Residential Property Market since it was introduced in 2014 by the former Chancellor, George Osborne, but like most air breathing mortals today, I have absolutely no confidence in the Chancellor’s ability to design an efficient and sustainable alternative system, which pleases more than it irritates.
Reeves hands strapped
Although other countries have hefty property taxes, i.e., parts of America, it is never a good thing to ‘cherry pick’ the rights and wrongs of two disparate tax systems, since they all have their own eco-cultures. The Chancellor has hand strapped herself by the restrictions in the Labour Manifesto of 2024 and exacerbated by her own fiscal rules. From the last Budget, and at the Labour Party Conference, she was proud to claim that she will not come back for more taxes, and this looks like a hollow promise if ever I saw one.
Increasing VAT to 22.5% would raise the Exchequer £21billion per year and although it would ‘drive a coach and horses’ through the Manifesto promises, it would be a quick fix and an instant injection of much needed cash.
No cataclysmic drop in real underlying values
Back at the ranch, press editors today, seem obsessed with the notion that property values are in a death spiral, but this could not be further from the truth. Although I have been through four recessions to date (and have the scars to prove it) I can tell you that there is no cataclysmic drop in real underlying values but only in ‘frothy asking prices’, which should never have been imposed by sellers or their agents in the first place.
Sadly, devious agents, bent on bolstering their portfolio of properties for sale, feed the vendors greed and deliberately impose asking prices, which in some cases are 15-20% above value. They use the tried and tested ‘bait and switch’ method whereby they wear the seller down over time until the real value is achieved.
Asking price both brake and accelerator
Given that an asking price is both a brake and accelerator of a sale, in these challenging times if you exceed underlying value by more than 5% you will ‘insure yourself’ against a sale.
Yes, asking prices are being slashed with a machete to provoke a sale but underlying values have not changed that much and if they have, by no more than 5-10% in certain areas.
We beg and plead with our vendor clients not to ‘take the Michael’ by asking a zealous price and when they take a ‘reality pill’, hey presto, sales result reasonably quickly afterwards. Hence there is nothing wrong with the present market.
By way of illustration, Glentree have sold £90million worth of property in the last three months, and in doing so this tested our skill set to the maximum, even though we are in midst of ‘silly season’.
Wake up and smell the coffee
My advice to a seller of a property today is to ‘wake up and smell the coffee’ and be reasonable about pricing, you will then get a sensible reaction from potential buyers. Q.E.D.