Autumn budget: the landlord's guide

Tue 11 Dec 2018

Following announcements made during Phillip Hammond’s Autumn Budget, here’s a summary of key changes landlords may face across in the coming months and year, including: adjustments to the income tax, personal allowance and higher rate thresholds.

The Autumn Budget was opened with a confident prediction from Chancellor Hammond, that it would “open a new chapter in our country’s economic future”. At a time of uncertainty for Britain and its economy, in light of ‘Brexit’, many deemed this a sceptical opening.

Despite this, the Budget announced few changes for landlords when compared to recent years and proved no materialisation of pre-Budget rumours of incentivising longer-term tenancies or selling properties to sitting tenants.

Summary for landlords

Perhaps the most important announcements for landlords were around personal tax; including the changes to the personal allowance and higher rate income tax thresholds.

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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 (known as Private Residence Relief – PRR).
- Lettings relief currently allows landlords who are letting a property in which they have previously lived in to claim additional relief on the years that the property has been let out, equivalent to the PRR, 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, e.g. if the landlord is letting out rooms or a part of the property, such as an annex or garage (landlords who let to one lodger only are already eligible for PRR).

Furthermore, the final period of 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.

Income Tax

The Chancellor brought forward the Conservative manifesto commitment to increase the tax-free Personal Allowance to £12,500 and raise the 40 per cent 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.

Other housing announcements

- The Budget confirmed an additional £500m for the Housing Infrastructure Fund, raising the total to £5.5 billion which will support the construction of 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 connection.
- The Government signalled its commitment to the high street, with a £675 million fund available to support local authorities to regenerate town centres – the Future High Streets Fund. This offers landlords of inner city and town properties the prospect of higher demand, as high street locations become even more favourable amongst prospective tenants.
- In addition to the above, the Government has suggested its intention to relax constrictions around converting commercial and residential properties into residential use – potentially great news for many landlords and property investors. Further details are expected to be published soon1.

For more information on how the Chancellor’s Budget plans could impact your lettings portfolio, contact your local Leaders property experts.

For more articles like this, why not take a read of the latest on taxation for landlords.

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