So, the Spring Budget has been announced and while Philip Hammond’s Spring Budget is unlikely to go down in the history books it is still a great opportunity to take stock.
Here is our summary of the key points relevant to the property industry.
If you are a landlord
The good news? Well, let’s say that the Budget held no further bad news for buy-to-let investors who have already felt the screws turning on profits. The sad news is that the Chancellor will not be reversing the additional stamp duty charge or the mortgage interest tax relief changes expected to come into effect next month.
As planned, mortgage interest tax relief will be gradually cut back to the basic rate of 20% between April 2017 and April 2020. Higher rate (40%) and additional rate (45%) taxpayers will stand to lose the most.
Wear and tear relief has already been capped at a rate of 10%.
However, the amount you can earn in rental profits before tax is payable will soon nudge upwards as the personal tax-free allowance – currently £11,000 – will rise to £11,500 from 6 April. And the Chancellor confirmed it would stand at £12,500 by 2020.
So, if you are a landlord with a large buy-to-let mortgage, it is imperative you sit down with your accountant, digest the new mortgage interest changes and make sure you have accounted for them. If you do not have a mortgage or if you are a lower rate payer, good news: you will not be affected at all.
Thinking about setting up a limited company? Think again.
As limited companies can still benefit from the full mortgage interest deduction, we have already seen a large number of landlords setting up - or considering setting up - a limited company to pay less tax, in order to avoid the imminent mortgage tax relief changes.
But this trend has certainly not gone unnoticed, the Chancellor has clearly hinted that he does not want landlords forming companies to dodge the tax hit, announcing in the Budget that the tax free dividend allowance for company directors will be slashed from £5,000 to £2,000 from April 2018. The dividend allowance cut will cost basic-rate taxpayers £225, higher-rate taxpayers £975 and additional-rate taxpayers £1,143.
If you are saving for your first home
The Chancellor presented an additional option in his Budget speech by confirming the launch of new National Savings & Investments 3-year bond (which he has talked of in his Autumn Statement)
Available from April this year, the account will pay a fixed rate of 2.2% on deposits of up to £3,000. The maximum total interest available on the account is £202 before any tax is accounted for.
Thankfully, deposit savers have alternatives.
• The Lifetime ISA, which can be used for first home OR retirement savings, is set to launch as planned on 6 April. For every £1 you save into the account, the Government will contribute another 25p and it’s all tax-free. The annual contribution limit is £4,000 which puts the maximum Government bonus available at £1,000 a year.
• The Help to Buy ISA, which launched in December 2015, allows you to save up to £200 a month into the account (in addition to an opening £1,000) and earn interest tax-free. The Government will then top up your pot with a tax-free 25% bonus (maximum £3,000) when you complete on the purchase of your first home.
• Help to Save, which is still set to launch in April 2018 will give lower-income savers who can stash away £50 a month, a tax-free bonus of up to £1,200.
If you are a tenant
If you were holding out for the ban on lettings agent fees Hammond promised in his Autumn Statement last year, the Budget failed to clarify a date at which it would take effect. In fact, it was not mentioned at all by the Chancellor. However, the consultation will reportedly take place this month or next, bringing the ban one step closer to reality. We will keep you informed.
Press Contact:
Miss. Claire White
W. Why Media
E. claire@whymedia.com
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