November 23

Stop press! What the UK budget means for buy-to-let landlords

The speculation, the reality, and what it all means for you

Buy-to-let investors have been given a rough ride from recent budgets. You’ve been hit with a 3% stamp duty surcharge on additional properties, a phasing out of tax relief on mortgage interest at the higher rate on income tax, and a change to the relief on maintenance costs. As we approached this year’s Autumn Budget statement, there was a lot of speculation that the Chancellor might, at last, make some things a little easier for the buy-to-let landlord and property investor.
Here’s a run-down of what was hoped for, what was announced, and what it all means for you as a buy-to-let landlord.

  • Mortgage interest tax relief

The speculation:
Higher rate taxpayers are being hit by the phasing out of mortgage interest tax relief at the higher rate of income tax. A repeal of this tax would help even the playing field again. But would the Chancellor repeal a measure that was considered popular among the majority of voters?
What the Chancellor actually announced:
No one expected the Chancellor to do landlords such a favour. And that’s exactly how it turned out. No change. The phasing out of mortgage interest tax relief at the higher rate is still happening as previously announced.
What this means for the buy-to-let landlord:
Buy-to-let landlords should continue to plan for this change – for example, by exploring sharing of properties with spouses and investing under a limited company structure.

  • Energy relief for buy-to-let landlords

The speculation:
From April 2018, all buy-to-let landlords must meet the new minimum energy efficiency standards (MEES). Properties that you let out must have a minimum energy rating of E. (Read about these new requirements in this article: “The buy-to-let landlord’s SWOT analysis of minimum energy efficiency standards”.)
It’s possible that you may need to improve your property/properties. Industry experts, including ARLA Propertymark, have suggested that the Chancellor should reinstate the Landlord’s Energy Savings Allowance (LESA). This would let you offset energy efficiency improvement costs against your income for tax purposes.
What the Chancellor actually announced:
Again, too much to hope for. It was never going to be a giveaway Budget for individuals, especially landlords whom so many perceive as being ‘greedy’.
What this means for the buy-to-let landlord:
Not great news for landlords, but again, as expected. Get going today with reviewing your properties for energy efficiency, and think about ways you can recoup any expenses – perhaps by raising rents? (A tip here: make sure you retain all the paperwork, invoices and receipts, as part of the records that property investors should keep.)

  • Incentivisation of longer tenancies

The speculation:
At the Conservative Party Conference, the Secretary of State for Communities and Local Government Sajid Javid said that the government wants to make life better for tenants. He suggested that the Chancellor might offer some tax incentives for landlords who offered longer tenancy agreements. Specifically, he said:
“All landlords should be offering tenancies of at least 12 months to those who want them. That is why, at the Autumn Budget, we will bring forward new incentives for landlords who are doing the right thing.”
What the Chancellor actually announced:
While he hasn’t announced any firm action on this, the Chancellor did say that a consultation will take place to assess the barriers to longer tenancies, such as mortgage lenders refusing to allow them.
What this means for the buy-to-let landlord:
It looks likely that longer tenancies will be encouraged in the future. Be prepared to offer them, and make sure you know the consequences of doing so. In the meantime, carry on as now – you want to be in a position to benefit from incentives if they are offered at a later stage.

  • Stamp duty

The speculation:
When you buy an investment property, you’re charged a stamp duty surcharge of 3%. It’s a direct impact on your profits. Some experts have said that the extra stamp duty (and the way that stamp duty is charged) is a big factor in the housing market slowdown.
Speculation had been rife that the Chancellor might scrap stamp duty for first-time buyers, eliminate the surcharge on additional properties, or switch the liability from buyer to seller.
What the Chancellor actually announced:
The Chancellor has helped first-time buyers. He has scrapped stamp duty for this group on properties up to the value of £300,000, and on the first £300,000 on properties priced up to £500,000.
What this means for the buy-to-let landlord:
While great news for first-time buyers, for property investors there is no change. However, it may be that sellers of properties under £500,000 may try to take the opportunity to increase asking prices, with the knowledge that first-time buyers will no longer have the stamp duty to pay.

  • Capital gains tax

The speculation:
When you sell a property, you might have to pay capital gains tax (CGT). This restricts your ability to replace the property with another in your portfolio. It was thought possible that the Chancellor might allow the rollover of CGT if you use the proceeds of the sale to purchase a new investment property.
What the Chancellor actually announced:
No changes to capital gains tax rules for property investors.
What this means for the buy-to-let landlord:
You will still need to plan for CGT, and this includes, perhaps, putting a property into joint ownership with a spouse before selling.

  • Other measures

The speculation:
As we closed in on Budget day, more possible announcements were speculated upon. For example, more funds to aid residential property investment, building more homes, more measures to help first-time buyers, and providing support to smaller property developers.
What the Chancellor actually announced:
In the housing market, the Chancellor announced a total of £44 billion in support of the housing market (including current spending) over the next five years.
He has targeted a net build of 300,000 new homes every year by the mid-2020s, and an extra £2.7 billion pumped into the infrastructure fund. The government will focus efforts on urban areas, seeking to release brownfield land and protect greenfield, while concentrating on providing high-quality, high-density homes where people want to live.
What this means for the buy-to-let landlord:
There are likely to be more investment opportunities near transport hubs and major centres of employment. More regeneration and infrastructure spending is likely, and that is likely to make places more desired by residents – consequently pushing up property values and rental prices.
Overall, though, there appears to be neither particularly good news nor bad news for buy-to-let landlords. Perhaps the best news is that there is at least some certainty now.
Of course, every buy-to-let landlord’s circumstances are different. What we’ve described as the outcomes for landlords is general commentary. Contact one of the Ezytrac team today on +44  01522  503  717, and learn what the Budget means for you uniquely and the strategies you can put in place to benefit from the good news and mitigate the bad.


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