Muddled Government Thinking
Recently took possession of a new apartment which I bought off plan. I arranged the mortgage just before the tax changes on mortgage interest was announced and also before the new rates were announced for Capital Gains Tax. I am wondering what to do with my property. I was originally going to let it on an AST but am now seriously thinking of a furnished holiday let. My mortgage is not restrictive and the property is in a town location with good all year round tourism potential. I have made a few enquiries with agents and even after their advertising costs, commission and cleaning and repairs costs I should be at least as well off even before tax considerations.
It seems to me that the message the government is sending out is - We don't really want people buying properties just to provide good homes for people who cannot afford to buy or do not want to buy and this government will punish them for doing this - We would much prefer instead that people rent out their properties as holiday lets and we will reward their public spirited behaviour by allowing them to offset all of their mortgage interest at their highest rate of tax. To further incentivize property owners to act more responsibly we will further reward them when they sell their property at a profit by charging them a lower rate of CGT.
What an absolutely stupid ill thought out policy. We still don't get any more properties on the market for people to buy whilst at the same time diminishing some people of homes for long term renting. Also perhaps putting some hotels out of business.
In the 'good old days' tax changes were never brought in retrospectively unless abuse or dodgy tax avoidance schemes were involved. In this case I would grumble far less if Osborne had said the tax changes to mortgage interest would only apply to new mortgages from the date of his announcement. It is very unfair to penalise borrowers by changing the rules AFTER they are committed to the mortgage payments.
I digress slightly, but as an example, years ago you used to get some tax relief on life insurance premiums but later on it was scrapped. However existing policies in force still got the tax relief unless the policy was substantially changed. Maybe the thinking was that if people's premiums went up then they might struggle keeping up the payments. It's a pity the same rationale wasn't used with the mortgage interest rate announcement.
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