Gregor Mitchell says that while the Chancellor has given much-needed tax relief to the North Sea energy industry in his 2016 Budget, changes to Capital Gains Tax (CGT) are not all good news for owners of investors in the city’s property market.
“The Chancellor’s confirmation that CGT will be cut to 20% for trustees and higher rate taxpayers and to 10% for basic rate taxpayers may have raised a cheer from investment property owners in Aberdeen – but the exceptions mean those celebrations will be short-lived,” says Mr Mitchell.
“Current rates of CGT (28% and 18%) will remain for residential properties - so the move will not assist owners of investment properties and those with second homes.
“The Scottish Government has already announced a Land and Buildings Transaction Tax surcharge of 3% to purchases of second residential properties worth over £40,000, from 1 April 2016.
“Westminster has confirmed that from April 2016 it will restrict the reductions that can be claimed under “wear and tear” relief. Individuals will only be able to deduct the cost of actual repairs – presently 10% wear and tear can be deducted from annual rental income before tax.
“These changes would appear to be a concerted effort to discourage landlords and those holding second properties and are unlikely to act as any kind of boost to the market. Those buying-to-let or picking up a holiday home tend to be active in the lower to middle market where activity is already depressed across the board.
“So all-in-all, not too much cheer for the Aberdeen housing market in the Budget.”