PayProp: Govt revenue increases could affect PRS

The government’s revenue-raising measure may impact the private rented sector (PRS), according to PayProp.

PayProp: Govt revenue increases could affect PRS

The government’s revenue-raising measure may impact the private rented sector (PRS), according to PayProp.

The firm noted that the upcoming Budget will likely provide clarity on the stamp duty holiday, Capital Gains Tax (CGT) and rent grants.

In addition, PayProp believes that the Budget will focus on the government’s response to the ongoing COVID-19 pandemic.

As a result, the rental payment provider outlined that it is thought the property market could be targeted as a means to raise funds to close the deficit.

As reported on 15 February, it is speculated that Chancellor Rishi Sunak is considering a six week extension to the stamp duty holiday.

Neil Cobbold (pictured), chief sales officer at PayProp, said: "A short extension to the stamp duty holiday could help investors with transactions already in the pipeline to benefit from a significantly lower tax bill.

“However, merely moving the cliff-edge back by six weeks means thousands of purchasers could still miss out.

"Understandably, the Treasury will be keen to return the previous stamp duty threshold to raise revenue to fill the spending gap created by the pandemic, but reimposing the full rate of tax would discourage sales.

"Bear in mind stamp duty revenue will increase further in April when an additional 2% surcharge is introduced for overseas property purchasers.”

Cobbold went on to explain that some investors may miss out on stamp duty holiday savings when the deadline passes, as the new surcharge on overseas investors could reduce competition and make it easier for domestic landlords to expand their portfolios.

In addition, PayProp noted that there is speculation surrounding the government introducing a rise in CGT rates and lower the number of exemptions.

This follows a report published by the Office for Tax Simplification, which suggested higher CGT rates could net the Treasury an additional £14bn each year.

Cobbold said: "Increasing CGT rates is seen as an easy way for the government to increase revenue as it’s a tax paid by relatively few people.

“However, it affects landlords selling properties and would have a more pronounced impact on our sector than many others.

"If changes to CGT are introduced, the government must take into account the additional burden that could place on the rental market, including the potential to discourage investment and reduce the supply of available housing."

"There were also significant changes to the CGT system introduced in April last year, so it remains an issue all landlords will be considering carefully when deciding the future of their portfolios."

Furthermore, the rental payment provider outlined the Chancellor may introduce a support package for tenants, in order to help them pay off arrears built up since the start of the pandemic.

He said: "If it isn’t extended again, the end of the furlough scheme in April could cause rent arrears to worsen, impacting landlords' finances and letting agencies' management fees.

“Throughout the pandemic, letting agents have helped landlords to manage arrears effectively by communicating with tenants and organising affordable repayment plans, but direct support from the government could ease the pressure on all parties and reduce the need for evictions once the ban is lifted.”