Budget delivers tax blow to landlords
Buy-to-let investors and accidental landlords in London who are looking to cash in on rising property values in the capital have been dealt a blow by Chancellor George Osborne.
In his 2016 Budget speech on Wednesday, the Chancellor announced residential property was excluded from a tax cut that will see investors in other types of asset benefit from the higher rate of Capital Gains Tax being reduced from 28% to 20%, while the basic rate will fall from 18% to 10%.
And following the announcement of a 3% stamp duty surcharge on purchases of additional property that comes into force on 1 April, the Budget speech included news that this move will be extended to investors who buy more than 15 residential properties.
Commercial property buyers also face higher stamp duty fees.
Previously, stamp duty rates for commercial property applied to the whole transaction value, with fees of 3% being charged for business premises sold for between £250,001 and £500,000, and 4% above that figure.
But from now on the rates will apply to the value of the property over each tax band.
The new rates and tax bands will be 0% for the portion of the transaction value up to £150,000, 2% between £150,001 and £250,000 and 5% above £250,000.
Stamp duty rates for leasehold rent transactions will also change, with a new 2% rate on leases with a net present value over £5m.
The 2016 Budget did not bring much better news for anyone in London hoping to move out of the rental sector and buy a property.
The Chancellor used has turned the existing Help to Buy ISA into a new Lifetime ISA for savers aged under 40. This will continue to pay a 25% bonus to account holders saving towards their first home, but will also pay the government top-up if the saver holds on to the ISA until retirement.
However, the savings and bonus can only be used towards a deposit on a first home worth up to £450,000. This will exclude many homes in London.
Other measures affecting the property market
The 2016 Budget also contained a number of other announcements affecting the property market.
- Homeowners who rent out either their parking spaces were handed a £1000 tax break, which will come into force in April next year.
- Others who let their flats and houses as holiday homes using sites such as Airbnb will also be offered the perk as an incentive to declare their earnings.
- The government has unveiled its Starter Homes Land Fund prospectus and is inviting local authorities to access £1.2bn of funding to “remediate brownfield land to be used for housing”. Chancellor George Osborne says this aims to deliver at least 30,000 starter homes – far below the 59,000 new homes per year that it is estimated London alone needs.
If the 2016 Budget has persuaded you to remain being a landlord but you are having difficulty finding the time to run a property business, contact Assetgrove immediately.
Our Guaranteed Rent Scheme not only takes the hassle out of property management, the overwhelming majority of our landlords earn above market rates on their rental homes.
No matter what type of property you own within the M25, Assetgrove will maximise its rental income and guarantee you a fixed monthly income for up to five years.
For more information on the Budget, click on the link below: