Council Tax Relief on Second Homes Could be Scrapped

If you are lucky enough to own a second property then you may also be lucky enough to be receiving a council tax discount on that home.  Some second homeowners enjoy savings of up to 50%, but under plans announced by Communities Secretary Eric Pickles, these discounts could soon be scrapped.

If the plans go ahead, councils will have the power to remove or reduce council tax relief if you own a second home whether it is occupied or empty.  Eric Pickles went on to say that this money would help to keep overall council tax bills down.

Granny flats or annexes could also be in the firing line under new proposals where these properties could be seen as separate properties.

Eric Pickles also announced that he wants everyday families to cope with living costs and that by putting these plans into action the overall council tax bill of the average family would be greatly reduced.

He is also expected to stress that there are currently no plans to alter the rules for council tax relief that is made available in special circumstances such as homes being left empty because a person has died or moved into hospital or a care home.

In a move to protect family homes, councils will also be encouraged to give local homeowners discounts if they pay their council tax bills online.

At present, discounts on second homes and empty properties in the UK range from 10% to 50% and can be worth hundreds of pounds a year.

The government said the reforms would allow for a £20 reduction in the annual bill for a typical Band D property in England. The current average for a Band D property is £1,196.

Mr Pickles said: “Under Labour, council tax went through the roof.

“This government has scrapped Labour’s council tax revaluation and is helping (to) freeze council tax for two years.

“I want to do more to help everyday families with their cost of living, and protect family homes from tax increases.

“By removing the subsidised tax breaks for empty homes and second homes, we can cut £20 a year off families’ council tax bills by treating everyone equally and fairly.”

2010 Budget Implications for UK property

The UK government today announced their 2010 emergency budget to the house of commons and it makes significant changes to the taxation concerning income and capital gains from property.

The Headlines:
– Income tax threshold raised by £1000 to £7475
– UK Economy growth forecasts reduced to 1.2 percent this year and 2.3% in 2011
– Capital Gains tax raised from 18% to 28% for higher rate income tax payers from midnight tonight
– Capital Gains Tax remains at 18% for low and middle-income savers
– Council Tax frozen for 12 months from April 2011
– Corporation tax to be cut progressively over the next few years
– VAT to rise from 17.5% to 20% from January2011

The rise in Capital Gains Tax (CGT) was expected by most to rise to the same level as income tax (40% for higher rate) – so this announcement will not come as a shock but maybe some small relief to those expecting a greater hike. Lower income bracket earners wil be relieved that the tax payable on the sale of property (other than a principle dwelling) will remain at 18%

Private landlords will also, no doubt, be calculating the impact on the rental sector that the changes to income tax and housing allowance may produce.

The effect on inflation, trade and unemployment will also have a bearing on inflation, affordability and access to finance – all of which will have a bearing on house prices over the next two years.

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Sources: BBC, Reuters, Sky News