It believes this should be done before progressing any further with plans to implement higher council tax bills on second homes and force homeowners to use inherited second homes as a pensions top up.
The amount of inheritance tax (IHT) collected by the Government during Labour’s first term, in the tax year 1997-98, was £1641m. By the end of the tax year 2004-2005, this figure had increased by 77% to £2,907m. This massive leap can be partly attributed to the Governments has refusal to increase the IHT thresholds in line with house price inflation since it came to power. This has meant that an increasing number of people have been falling into the IHT bracket year on year. With 1.6 million now facing inheritance tax, it is clear that the Government needs to bring IHT thresholds in line with the rise in house price inflation before taking any steps to include inherited second homes in pension calculations.
Stamp duty already eats into the profits of principal homes. Whilst the Government’s move to increase the zero per cent stamp duty threshold to £120,000 in this year’s budget was a welcome one, it has done nothing to help first time buyers in many parts of Southern England. The Government also failed to heed calls from the NAEA and others in the industry for a total review of the stamp duty scales, especially at the middle and higher end where again the effects of house price inflation has been ignored.
Peter Bolton King, Chief Executive at the NAEA, comments: “Many people strive to pay off their mortgage so they can leave their family some security after their lifetime. The plans to penalise those who inherit second homes could force those facing old age to sell their family home and downsize, or even move into rented accommodation, to reduce the burden on their children.
“Whilst the NAEA accepts that second homes in popular tourist destinations do not help the plight of the first-time buyer, the second homes market only accounts for a small portion of ownership. In reality higher council tax bills are unlikely to slow down the second homes market and any change to IHT and pension provisions is yet another stealth tax. The real issue here is the affordability of principal homes in certain areas, and the Government will need to find another way to address this if it wants to achieve any degree of success.”
