By Jo White
For the first time in a while the Chancellor did not specifically mention landlords when standing up and making his Budget speech earlier this month.
For individual landlords, the main area of interest was the confirmation that the tax-free personal allowance will be £11,500 for 2017-18 with the higher rate threshold being set at £45,000. With the changes in mortgage interest relief applying from April 2017 this may mean some landlords might still fall below the higher rate threshold and therefore get full relief on their mortgage costs for another year.
Where properties are owned in companies a reduction in the new tax free dividend allowance from £5,000 to £2,000 will see an increase in an individual shareholder’s income tax position from 2018-19.
The Chancellor confirmed that the new £1,000 Income Tax allowance will be available for trading and property income. This means that no tax will be payable on profits at this level nor will reporting be required.
A new cash basis for landlords will be available from 6 April 2017 potentially helping with cash-flow and matching the tax with the money received. Where landlords have both overseas and UK property portfolios then they can decide whether to apply the cash basis to either one or both of these businesses. If you jointly own property with your spouse or civil partner, then you both have to adopt the same accounting method. Properties owned in LLPs, Trusts or companies cannot benefit from these rules. Nor can individual landlords with turnover in excess of £150,000.
The Chancellor announced that the need for quarterly reporting for landlords turning over less than the VAT threshold (currently £83,000) will be delayed for one year meaning it will not be adopted by those individuals until April 2019. This is part of the Making Tax Digital initiative announced previously by the Government.
The proposed change to the Stamp Duty Land Tax (“SDLT”) deadline of reporting and payment of 14 days has also been delayed until 2018-19.
Finally, a consultation is to be launched to re-design the rent-a-room relief to be better targeted for longer-term lettings.
Whilst not the most dynamic Budget from Philip Hammond, it will give landlords the chance to reflect on the changes pre-announced and start to think about any future opportunities.
Jo White is a Tax Consultant at Kreston Reeves, who works regularly with landlords and clients in the property sector, among others. She can be contacted on 01403 253 282 or via firstname.lastname@example.org.