Wealthy breathe a sigh of relief at Tory victory

Additional rate taxpayers, non-doms, London property owners and buy-to-let landlords breathed a collective sigh of relief at Friday's surprise Conservative victory, though investor euphoria will be tempered by the future risk of a "Brexit" and fears surrounding pension reforms.

For now, the wealthy no longer have to worry about Labour's plans to reintroduce the 50p top rate of tax, end non-dom status, levy a "mansion tax" on homes worth over £2m and heavily regulate the private rental sector.

But despite the abundance of blue rosettes, advisers warn it will soon be "open season" on pension tax reliefs and the pensions industry is concerned that Steve Webb, the UK's longest serving pensions minister, and shadow pensions minister Gregg McClymont both lost their seats.

At a stroke, this removed two of the most qualified technical experts from the government and opposition, leading some to call for a non-partisan pensions minister to steer complex reforms to both state and private pensions.

"Having a minster that resides outside the political spectrum will give continuity and longevity over an issue that will be one of the greatest challenges facing the country over the coming decades," said Nick Ayton, managing director of GenLife, the pensions provider.

"We would like to see such a minister sit in the House of Lords to ensure that there is continuity over the coming years and avoid the instability of further political upheaval."

David Gauke, a Treasury minister in the last government, is tipped to replace Mr Webb when David Cameron announces his new cabinet in coming days. An alternative might be to create a wider brief for Ros Altmann, the economist, pension expert and "champion for older workers", who is set to become a Conservative peer.

Although they have escaped a 50p top rate, the well-off may not avoid other tax rises during the course of the next parliament. All the parties in the election promised to raise money from cracking down on avoidance.

And Tom McPhail, head of pensions research at Hargreaves Lansdown, said that despite the Tory victory, it would soon be "open season on pensions tax relief" noting the party was likely to restrict tax relief for higher-earning taxpayers.

"So much has happened so fast with pensions policy that further tinkering seems inevitable," he said. "Cutting back on pension tax breaks now looks like easy money for the government; they'll start with the higher earners and work their way down from there."

The prime minister's pre-election pledges to not increase income tax rates, national insurance, or VAT during this parliament effectively "padlocks the levers" of the Treasury, said George Bull, senior tax partner at Baker Tilly, warning that tax promises made during the campaign would make the chancellor's deficit reduction plans difficult to deliver without clawing the money back through less high-profile levies.

"A fairly obvious target" for a restricted chancellor is the lifetime limit for entrepreneurs' relief, said Mr Bull. The tax break, which allows business sellers to pay capital gains tax on their profits at a lower rate, has been criticised for costing the exchequer much more than forecast.

Restrictions on capital gains tax relief on the sale of primary residences could also be introduced, Mr Bull added, either through a lifetime allowance on tax-free gains or by a limit per transaction.

For now, the property market looks set to return to rampant house price growth - particularly in London, where estate agents are already reporting a deluge of calls from wealthy (and relieved) overseas buyers.

The price of expensive London homes could now rebound by 20 per cent in the next 12 months, Ed Mead, a director of Douglas & Gordon estate agents, forecast.

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Warning that these proposals could have destabilised the buy-to-let sector, Richard Lambert, chief executive of the National Landlords Association, said the Tory majority "should give confidence to landlords to invest their own money in providing homes and allow the rental market to develop to meet the needs of a rapidly changing tenant demographic".

While the Conservative manifesto had not mentioned rented housing, Mr Lambert said: "It will be difficult to ignore during the next Parliament if predictions that more than a quarter of households will be renting privately by the 2020 election are right. The new housing minister needs to take a strategic view if they are to avoid being tempted into short-term, crowd-pleasing initiatives."

Additional reporting by James Pickford and Adam Palin

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