Capital Gains Tax tightening, Universal Credit changes and injections into the housing market. The pre-Brexit budget revealed.
Phillip Hammond ended his 2018 Budget on a high note, revealing that the Personal Allowance will raise to £12,000 (£50,000 for higher rate tax payers) in April 2019, one year before the promised date. His speech promised an ‘economy working for everyone,’ and the final figures certainly sounded good. But what were the key takeaways for landlords?
Capital gains tax
'I didn't come into politics to put people's taxes up' declared Mr Hammond proudly. Unless, of course you are a landlord looking to sell your property, then, sadly, you’re in for a bit of a pasting.
One of the big changes for landlords in the Budget was the changes to Capital Gains Tax regulations, with the Chancellor tightening the rules to close loopholes which allow landlords to minimise the tax by living in their properties before selling them.
Private residences were kept out of the clutches of the capital gains restrictions, however the rope tightened around landlords, as the £40,000 lettings relief on CGT was scrapped. The Principal Private Residents relief is now only available if the landlord is living in shared occupancy with the tenant – putting the brakes on the landlord moving in once the tenant has vacated - and the final period of relief has been dropped from 18 months, down to nine.
Capital Gains Tax is paid on any profit that is gained from the selling or disposal (this includes giving it away, transferring ownership or exchanging) of an asset.
Creation of new homes
There was an update on the government’s pledge to inject some new life into the static housebuilding market, with a further £500m investment into the infrastructure fund and £1 billion pledge for the revival of SME housebuilders.
There’s also calls for further support on developing existing property, with projects in the pipeline to explore the potential to develop existing commercial property into residential homes, in order to meet the growing need. There are plans to deliver 650,000 homes, so there is plenty to be getting on with!
Following the success of the scrapping of stamp duty for first time buyers in last year’s Budget, with over 121,5000 homeowners benefitting, the Chancellor has extended the scheme, with buyers in the market for shared-ownership homes up to £500,000 now eligible for help. Buyers who have bought a property in this bracket over the past 12 months can backdate their assistance.
As well as helping first time buyers get their foot on the property ladder, the Budget outlined plans to help build more communities, with a neighbourhood planning schemes designed to sell local homes to local people, ensuring that communities are able to stay together. The role of private landlords within this scheme is yet unknown, but with many people still unable to consider getting on the ladder - despite the Chancellor stating that ‘the era of austerity is finally coming to an end’ and that we should expect to see real wage growth every year for the next five years – there is still a definite need for private rented accommodation within our towns, cities and villages.
With the implementation of this contentious new benefit scheme hitting the headlines recently, it is no real surprise that the Chancellor had a plan in action to address the concerns.
Many landlords are among those nervous about the introduction of Universal Credit, and Mr Hammond was quick to note that he understood how he ‘recognises the genuine concerns about two main issues (implementation and rates)’ and outlined a five-year plan to support the scheme.
In order to smooth the implementation of this ‘major structural reform to our economy’, a further £1 billion has been pledged to deliver the scheme over the next five years. Further details of the implementation will be delivered by the Secretary of State for Work and Pensions in the coming months, but this cash injection should hopefully see a significant increase in manpower at the cutting edge of delivery. Many landlords report that one of their main concerns is that their tenants find it difficult to register for UC, and struggle to ensure a simple transition from traditional housing benefit to the new scheme, which can lead to them not receiving any payments for some time, and ultimately, rental void periods for the landlord. This significant cash injection may go some way to eliminating this issue, however we will have to wait and see!
Mr Hammond’s other pledge was regarding Universal Credit rates. He has promised to increase work allowances by £1,000 a year, which should benefit 2.4 million working families with children and disabled people, by around £630 a year.
He closed his section on Universal Credit with a statement designed to quell any whispers about the possibility of the scheme being shut down. ‘Universal Credit is here to stay and we are putting in the funding it needs to succeed... Work should always pay.’
We’ll be discussing how Universal Credit impacts you as a landlord and your tenants, along with experts from the National Landlords Association during a free webinar on Tuesday, 4th November at 7pm.
Some good news!
Whether you’re drowning your sorrows or raising a toast, you can do so safe in the knowledge that your pint, or spirit won’t cost you any more in tax.
And, after an evening celebrating (or commiserating) the bus ride to the office in the morning may be a little smoother too, the Chancellor has confirmed £420 million to be dispatched to local councils immediately for the management of potholes and bridge repairs.
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