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Budget June 2010 - housing

  • Published: Tuesday, 22 June 2010

A number of changes have been announced which relate to housing costs. There is a planned freeze on Council Tax, a major reform of Housing Benefit and increases to Capital Gains Tax for higher rate tax payers. Stamp Duty has been left at its current levels for now.

Council Tax

The government has said it will work with local authorities to freeze Council Tax in 2011-2012.

Capital Gains Tax

Higher rate taxpayers face an increase in Capital Gains Tax from 18 to 28 per cent, with effect from midnight on 22 June 2010.

Low and middle income savers who pay income tax at the basic rate will continue to pay tax on their capital gains at 18 per cent.

Stamp Duty Land Tax

High value properties

The government will examine whether further changes to the rules on Stamp Duty Land Tax on high value property transactions are needed to prevent tax avoidance in this area.

First time buyers

As announced in the Coalition Agreement, the government will review the Stamp Duty Land Tax Relief for first time buyers, also known as the 'Stamp Duty Holiday'. The review will take into account its impact on affordability and value for money.

Furnished holiday lets

The proposal inherited by the government to repeal the special tax rules for furnished holiday lettings will not be implemented.

Instead, the government will consult over the summer on a proposal to ensure the tax rules meet EU law in a fiscally responsible way, by changing the eligibility thresholds and restricting the use of loss relief. Any changes will take effect from April 2011, and in the meantime the current rules continue to apply for the 2010-11 tax year.

Housing Benefit

The Chancellor announced a major reform of Housing Benefit from April 2011. This is part of larger 2011 welfare reforms that aim to make the system fairer and more affordable.
The measures include:

  • re-setting and restricting Local Housing Allowances
  • increasing deductions
  • reducing certain awards
  • time-limiting the receipt of full Housing Benefit for claimants who can be expected to look for work
  • restricting Housing Benefit for working-age claimants in the social rented sector who are living in a larger property than their household size warrants
  • new maximum limits on housing benefit: from £250 a week for a one-bedroom property to £400 a week for a property of four or more bedrooms
  • re-adjusting Support for Mortgage Interest (SMI) payments - currently 1.58 percentage points above the Bank of England Base rate; from October 2010 SMI will be paid at the Bank of England’s published Average Mortgage Rate

The Chancellor said that the combined measures would reduce the cost of Housing Benefit by "£1.8 billion a year by the end of the Parliament".

Measures to support those most in need

More resources will be targeted at those most in need of help with their housing costs. These include:

  • increasing by £40 million the budget for Discretionary Housing Payments, which deal with hardship cases
  • covering the cost of an additional room for claimants with a disability who need a carer

Changes to how the rate of Housing Benefit is set

From April 2011, Housing Benefit will be set in line with the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI). Both are measures of inflation published monthly by the Office for National Statistics.

The CPI measures the average changes in the prices of consumer goods and services in the UK from month to month. It is the main UK measure of inflation, and forms the basis for the government's inflation target.

The RPI is similar in nature to the CPI, but differs in the type of goods covered and how it is calculated. The RPI includes mortgage interest payments and housing depreciation, while the CPI does not.

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