Financial Transaction Tax - Does it make property more attractive to investors?

RenovationMan

chewmylegoff wrote: »

They could just tax the advance of the mortgage from the bank to you. It is a transaction tax that is proposed, not an 'investment' tax, so I don't see that being a problem. They may tax the bank not the borrower, but who do you think that cost will be passed on to?

Doubt the govt / EU would have a problem shafting those who are already paying stamp duty on a house purchase - quite happy to apply VAT to fuel duty e.g.

I guess if the taxation was on the initial purchase of the house then the way around it would be to buy before the tax comes in. With a pension you make smaller transactions but more often, spanning decades and would be hit often by the tax, with a house you make a large one off transaction and then take decades to pay down the mortgage.

wotsthat

DervProf wrote: »

Now, what could a government tax to bring in extra revenue ? What part of the economy seems to have done well in recent times ?

Why would you want to tax a part of the economy that's doing well?

An objective of pure revenue raising doesn't seem the best basis for effective taxes.

DervProf

shortchanged wrote: »

As long as the banks keep a tight reign on lending now there is virtually no chance of house prices rocketing like that in the next few years.

Agreed.

I suspect that lending will be adjusted to meet prices, rather than prices adjusting to lending. Therefore I think there is a chance that house prices may "rocket" (well, increase a bit) in the next few years. I think we still have a year or two of ~0% HPI before prices start to edge upwards consistently.

DervProf

wotsthat wrote: »

Why would you want to tax a part of the economy that's doing well?

Because you can't really tax part of the economy that's doing badly ?

Blood out of a stone, and all that.

RenovationMan

shortchanged wrote: »

I don't think property is really a very good investment now as it is already overpriced, therefore I don't really see any massive gains over the next few decades, probably no better than sticking the money in a savings account.

The investment return from BTL would be from rental income not from HPI. The aim would be to ensure that there was enough of a return from the rental income to justify the initial investment (house deposit).

shortchanged_2

RenovationMan wrote: »

The investment return from BTL would be from rental income not from HPI. The aim would be to ensure that there was enough of a return from the rental income to justify the initial investment (house deposit).

But I wouldn't be surprised if the rental income from BTL's bought in the current climate would barely cover the mortgage, particularly in the next few years as interest rates inevitably rise.

RenovationMan

shortchanged wrote: »

But I wouldn't be surprised if the rental income from BTL's bought in the current climate would barely cover the mortgage, particularly in the next few years as interest rates inevitably rise.

In many respects, it's an advantage if the rent just covers the mortgage (including voids), management charges, maintenance, etc. because then you don't have to worry about increasing your income tax while you're working. The aim is to have an income in retirement, so as long as the BTL mortgage is paid off (or significantly paid down) at retirement age, then the rental income can become retirement income.

Generali

A financial transactions tax will be a tiny fraction of UK stamp duty.

There is an investing truism: never let the tax regime get in the way of a good investment. If something is given preferential treatment today it may not be tomorrow (e.g. 'Gordon's tax raid on pensions' ((c) Daily Mail); Labour's 1960s Unearned Income Tax of up to 167%; assorted windfall taxes on banks, oil companies, mobile phone providers (via the 3G auction) and utilities; IR35).

shortchanged_2

RenovationMan wrote: »

In many respects, it's an advantage if the rent just covers the mortgage (including voids), management charges, maintenance, etc. because then you don't have to worry about increasing your income tax while you're working. The aim is to have an income in retirement, so as long as the BTL mortgage is paid off (or significantly paid down) at retirement age, then the rental income can become retirement income.

But aren't the majority of BTL's taken out on IO mortgages?

RenovationMan

Generali wrote: »

If something is given preferential treatment today it may not be tomorrow

This is particularly true of pensions these days, successive government simply can't seem to leave them alone and yet still want people to support themselves in retirement.

Often mooted is the removal of the 25% tax free lump sum and the removal of higher rate tax relief. If these come in, coupled with increases in the age you can take retirement benefits, coupled with financial transaction taxation, coupled with appalling annuity rates, it makes you wonder if there will be a pensions industry when we finally get to retire.

These are the reason so many people have looked at BTL for retirement income in the past and why I feel an increasing number will look to it in the future. Where else can you invest an ever reducing amount of disposible income and hope to have enough to retire comfortably on?