Private landlords must look at budget announcements with dread. In recent years the chancellor's battered red briefcase has held some nasty surprises. Cuts to mortgage interest relief and the loss of the wear and tear allowance just two recent hammer blows felt by landlords. Changes to stamp duty were an even bitterer pill to swallow. That knocked the stuffing out of many private landlords.
But what did the chancellor have in store for landlords in his most recent statement? And what about tenants? How did they fare in the 2018 Autumn Budget? In this article we'll look at the implications of Philip Hammond's speech for everyone involved in the private rental sector.
First of all the good news. There were no income tax rises and stamp duty remains the same. Things got even better with the announcement that personal allowances will rise to £12,500. The higher tax threshold will also increase to £50,000 all of which will mean a reduction in income tax for some private landlords. But inevitably it wasn't all good news.
Unfortunately the chancellor proposed a change to capital gains tax. More specifically to private residence relief (PRR). The proposed changes will mean private landlords can only claim the relief if they're living in the property with a tenant. The proposals will affect smaller or accidental landlords rather than those with larger portfolios.
But it's important to stress these changes aren't set in stone yet. There will be a consultation period with the government looking to bring the changes in by April 2020. However, the Treasury estimate the changes to PRR will net the government nearly £500 million from 2020 - 2024. A financial reward which is likely to see the proposals accepted. Especially as the government see this as closing a loophole in the tax laws
A ‘budget for families’ was the ethos behind the chancellor’s speech. Along with rhetoric about austerity coming to an end. And tenants will welcome the changes to personal taxation and allowances.
We mentioned the rises in personal allowances earlier. These will see many tenants enjoy more money in their pockets when they receive their monthly wages. Other changes include the National Living Wage increasing to £8.21 per hour. This is a 4.9% rise from £7.83. The minimum wage for younger workers will also rise in April 2019.
A headline figure from the budget is £630. This is the amount the chancellor claims two million working parents will be better off by. This can only be good news for tenants.
The councillor also announced measures which will impact on those tenants claiming benefits. But it could be a double edged sword. They indicate the problematic universal credit is here to stay. Something many tenants on benefits may not be happy about.
There's an extra billion pounds to help the transition from the old benefit system while work allowances in universal credit will be boosted by nearly two billion pounds. All of which should, in theory, help those tenants who rely on benefits to pay their rent.
The chancellor also made more noise about affordable homes. First-time buyers' relief will apply to those buying shared equity homes of up to £500,000. But the reality is many would be home owners are still priced out of the market. There'll certainly be no slowdown in demand for rental accommodation from people struggling to get on the property ladder.
Private landlords will have breathed a sigh of relief once the chancellor sat down. There were none of the bombs dropped in previous budgets. Yes the change to private residence relief is a blow. But it may be argued landlords came out ahead overall. Whilst there were no direct benefits aimed at them the changes in personal allowance and the higher tax band will see a cut in tax for many.
Whilst on the face of it tenants have chalked up a number of victories, it must be noted that in turn this will alleviate some of the pressures on landlords and bring a benefit indirectly. The rise in personal allowances will make a real difference to incomes. And with many tenants paying up to 50% of their salary on rent that has to be welcome news.
Those tenants on low income or claiming benefits will also be pleased with the budget. An increase in national living wage will see incomes rise for some. Meanwhile the extra cash pledged to universal credit should reduce the problems many tenants have faced because of delays in payments. In some cases tenants on benefits have lost their homes. Hopefully, those issues will be a thing of the past.
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