Give us a break

THE Chancellor is dusting off his red box for the Budget on Thursday.

But with the current housing market still in turmoil what WILL he do to help hundreds of thousands of homeowners?

And what COULD he do to kick-start the housing market for those who want to buy their own home despite all that's gone on in the last 18 months?

This week I'm outlining my policies to help with the housing situation. Let's just see if Darling agrees . . .

Many people are now being forced to rent out their homes. Some simply can't afford to pay the mortgage themselves, but want to hang on to their biggest, hard-earned asset.

Others need to move, perhaps because of family changes or to find work, and are unable or unwilling, given cooling prices, to sell. So rather than accepting a much reduced price they are renting out their property.

Rent

Why should these distressed, "accidental" landlords pay income tax both on the rental income they will receive as a result of having to take desperate measures-and also potentially have to pay capital gains tax at 18 per cent on ALL the profit when they sell the property?

The Chancellor introduced a single rate of tax at 18 per cent this year, which applies to everyone regardless of income level or position, for capital gains tax. That's what you're likely to have to pay when you sell your property itif you've let it out.

So is it fair that a family struggling to make the mortgage payments but fortunate enough to be able to rent the property out for the next couple of years should be penalised for taking such action by having to pay 18 per cent tax on the equity they've fought so hard to preserve?

I would introduce an exemption scheme specifically for such cases. Working with mortgage companies, a system could be devised where struggling homeowners who approach their lenders for permission to let out their property could be provided with an exemption certificate.

As and when the time came to sell, the exemption certificate would then be provided to the Inland Revenue to allow for a one-off non-payment of capital gains tax specifically for those who had to let out their main home due to financial hardship.

Next up, politicians have been saying for months that the way to revive the economy is to get the property market moving. If Darling is serious about this, what about reconsidering the current stamp duty land tax arrangements?

As it stands, all properties below £175,000 are exempt from stamp duty. However, as the majority of family homes can cost between £175,000 and £300,000, most of those struggling to buy still have to pay tax.

This is what I would do get things moving:

1. RAISE current exemption on stamp duty from £175,000 to £300,000. It would be an incentive for many to move and create a positive housing market.

2. AFTER the exemption, raise the 1 per cent threshold from £250,000 to £300,000. This would reflect the difference in the market place since the current thresholds were introduced nearly two decades ago.

3. INTRODUCE a new band of stamp duty at 5 per cent on £1 million-plus properties that are still selling steadily. It makes sense for those who can afford it to pay more tax.

Even though house prices have dropped over the last 18 months, these measures would go a long way to helping those who are able to take advantage of low interest rates to get on the housing ladder or trade up.

My final measure would be to clamp down on greedy lenders charging extortionate redemption penalties that stop people swapping to cheaper mortgages.

For everyone's sake, Darling, think about homeowners when you open the box.

Got a question for Louisa? Email it to louisa.fletcher@notw.co.uk

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