Tax on big bonuses will impact top end of property market fairer

and yet another missed opportunity to make stamp duty

Ray Boulger of John Charcol, the UK's leading independent mortgage adviser, comments on today's Pre Budget Report: "The main impact of the PBR on the housing market will be at the top end, primarily in London and the South East.

The 50% bank payroll tax on discretionary bonuses over GBP25,000 will surely have some impact either on bonus levels or when they are paid.

The new tax will only apply to bonuses awarded between today and 5 April 2010 however, and so banks may simply defer awarding and paying this year's bonus until 6 April and then pay what they always planned to pay.

"This period of ambiguity will nevertheless create uncertainty and will in many cases reduce the ability and/or willingness of those whose bonuses are deferred, or are less than they expected, to buy an expensive property in the next few months.

The prime London market has been particularly buoyant recently in anticipation of a return of big bonuses and so this attack on high value bonuses has the potential to hit that sector of the market hard, at least in the short term.

"Despite many calls for the extension to GBP175,000 of the stamp duty land tax 0% threshold to be continued, these calls were more in hope than expectation and so seeing the threshold revert as previously announced to GBP125,000 from 1 January 2010 is no surprise.

It is disappointing, but again not surprising, that yet again Darling has followed in Brown's footsteps and refused to make stamp duty fairer by moving from the current system to an income tax style one where the higher rates only apply from their actual starting level.

"The Chancellor also confirmed today that the standard interest rate used for payments on the ISMI (Income Support for Mortgage Interest) scheme would continue for a further 6 months at 6.08% and claimed that this will continue to benefit around 220,000 homeowners.

However, according to the CML the number of borrowers currently being helped by the ISMI is only 100,000, but another 113,000 older home-owners are receiving help with their mortgage through pension credits.

It is not clear whether the figure of 220,000 claimed in the PBR is arrived at by adding these two figures together or whether 220,000 is the total number of borrowers expected to benefit from ISMI over the course of a year, bearing in mind that many will only benefit for part of a year.

"The PBR gives no figures for the number of borrowers in The Homeowner Mortgage Support Scheme, the new scheme announced last November after little to no consultation with mortgage lenders.

This lack of consultation led to a delay in the announcement of the full details of this scheme until some 5 months later.

Anecdotal information from lenders suggests that the number of borrowers put on this scheme is tiny.

ENDS Borrowers should contact John Charcol on 0800 71 81 91 or visit www.charcol.co.uk.

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