Budget 2018: Find out how landlords fared
Although light on announcements for landlords, statements around personal tax (including the changes to the personal allowance and higher-rate income tax thresholds) offered some respite. Read on to find out how it will affect you.
Chancellor Philip Hammond presented his Budget to Parliament on Monday 29 October with relatively few major announcements for landlords. While there were some pre-Budget rumours of incentivising longer-term tenancies or selling properties to sitting tenants, these did not materialise. Overall, the Budget was quiet for the private rented sector, although the changes to Capital Gains Tax relief will particularly affect accidental landlords.
Capital Gains Tax relief
The Chancellor announced the amendment of lettings relief on Capital Gains Tax (CGT) to only apply to resident landlords from April 2020. If you’re selling a property, any gains you make are eligible for CGT, unless it is your primary residence whereby you will be eligible for Private Residence Relief. Lettings relief currently allows landlords who are letting a property in which they have previously lived to claim additional relief on the years that the property has been let out, equivalent to the Private Residence Relief, up to a maximum of a £40,000 gain.
The change means that this relief will only apply if the landlord is still living in the property – for example, if the landlord is letting out rooms or a part of the property. Landlords who let to one lodger only are already eligible for Private Residence Relief.
Furthermore, the final period exemption on CGT, which applies regardless of the occupancy of the property, is being reduced from 18 months to nine months. This is intended to prevent homeowners from benefiting from capital gains on two properties, while allowing enough time for sales to be completed.
The Government will be consulting on these changes, to which we will be responding. We will share the announcement of the consultation on our website.
The Chancellor brought forward the Conservative manifesto commitment to increase the tax-free Personal Allowance to £12,500 and raise the 40 percent income tax threshold to £50,000, announcing that these will be in place from April 2019 – a full year earlier than expected.
This will have a beneficial knock-on effect for some landlords, bringing more into the basic tax rate and therefore reducing the impact of Section 24 for those who are affected.
Universal Credit, affordable credit and the minimum wage
Following a series of negative stories about the roll-out of Universal Credit, the Chancellor announced an additional support package for managed migration, of £1 billion over five years, in addition to the existing £1.5 billion committed. Details will be announced later in the year by the Secretary of State for Work and Pensions, Esther McVey, when she introduces the managed migration regulations to Parliament. We will be watching with keen interest to see how the additional support could help private tenants and landlords.
The Chancellor also revealed that the Universal Credit Work Allowances will increase by £1,000 a year, benefiting 2.4 million people.
Alongside this, Hammond pledged support for affordable credit, committing to a pilot of a new prize-linked saving scheme for credit unions and a consultation on a ‘breathing space’ scheme for people in problem debt. This would introduce a 60-day period of protection from creditor action to enable debts to be repaid in a sustainable way. The Government will also launch a feasibility study for a no-interest loan scheme pilot in early 2019.
The National Living Wage will rise by 4.9 percent to £8.21 from April 2019, and there will also be increases to the National Minimum Wage.
Other housing announcements
As previously announced at the Conservative Party Conference, the cap on local authority borrowing to build housing is being lifted, effective immediately in England, and expected to be lifted as soon as possible in Wales. This is predicted to lead to an extra 10,000 homes being built a year.
The Government also signalled its commitment to the high street, with a £675 million fund available to support local authorities to reinvigorate town centres – the Future High Streets Fund. As well as enabling investment in improvements, the Government intends to relax the rules around converting commercial and retail properties into residential use – a potential opportunity for landlords. Further details will be published later this year.
The Budget confirmed an additional £500m for the Housing Infrastructure Fund, raising the total to £5.5 billion and supporting up to 650,000 new homes. There is also £8.5 million for up to 500 parishes to allocate or permit land for homes to be sold at a discount, with the Government keen to empower neighbourhood groups to offer these homes first to people with a direct local connection.
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