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How will the New Tax Laws affect the Property Market?

How will the New Tax Laws affect the Property Market?

By Kris White

Estate agents, investors and non-domicile house owners are all waiting to see how the new tax laws will impact upon personal wealth and the UK property sector. The new rulings, to be introduced in April, will see non-residents liable for capital gains tax (CGT) on residential properties – as well as properties with the potential to be used as residential dwellings – sold in the UK. Previously, non-residents were exempt from the tax and the new rulings could have an impact on the rising tide of non-domicile house purchases in the capital.

Of course, many foreign buyers won’t be put off investing in London, as the natural growth in values and the healthy rental returns offered in the premium market will help to negate the CGT payable on the sale of property. However, it could affect certain sectors of the market where quick wins are still possible for canny foreign investors who snap up multiple units in developments and make a small fortune almost overnight.

New wave of BTL investors

Another big change could be afoot in April when pension reforms kick in and pension holders over the age of 55 are given the green light to withdraw the value of their pension pot in a single lump sum. Rather than using the fund to buy an annuity in order to secure a regular income, the new law means greater opportunities for one-off investments, with property being an obvious draw.

So, could this mean a new wave of buy-to-let investors striding through the doors of London estate agents? It could certainly pique greater interest in the market and could change the dynamic, as more investors could come to the table with mortgage-free offers. However, a certain degree of handholding may be required, as many pension-pot purchasers will be new to this sector of the property market. They could potentially be unaware of the issues surrounding BTL investments, as well as their responsibilities as a landlord. Although property is always seen as a wise investment, potential landlords would do well to ask themselves if retirement is a good time to take on a new realm of responsibility. Many may be keen to pay full management fees to estate agents in order to steer clear of the day-to-day issues and to sit back and let their investment grow as property prices increase.

With the usual upsurge in spring sales and the tax reforms coming into play, it’s likely to be a busy few months for many estate agents.