In just over a week, Chancellor Philip Hammond will deliver his Autumn Budget and there are a number of changes we can expect to see within the property market. The ‘housing crisis’ has long been high on the political agenda and with this in mind many of the predicted changes address such issues in the sector.
Breaks for Capital Gains Tax (CGT)
Predictions surrounding the property market tend to be doom-and-gloom, but with the Autumn Budget on the horizon, landlords could for once face some positive tax changes. In the coming months landlords could benefit from Capital Gains Tax relief if they sell their rental property to a tenant that has lived there for three or more years. It is thought that the government have followed recommendations and taken the advice of experts in the field in the hope to resolve the housing crisis and please landlords. The new changes to CGT would also benefit private renters with the relief being split equally between landlord and resident, giving tenants the opportunity to put down a deposit on the property.
Changes to Capital Gains Tax (CGT) filing
Chancellor Philip Hammond could also alter the draft legislation and filing system for Capital Gains Tax upon his Autumn Budget. Currently, landlords and owners of second homes can postpone CGT payments until filing a tax return for that particular year. However, the Autumn Budget could change this so that the payment of CGT is required within 30 days of the sale of any property.
Increasing Stamp Duty Tax
The current property market, landlords and investors are all still recovering from the punishing changes to stamp duty tax in 2016 and the Autumn Budget could reveal harsher changes still. It is expected that the current 3% surcharge on secondary properties will be increased in order to generate further Treasury funds.
Tax changes to limited companies
It is in the wake of section 24 changes to mortgage interest tax relief that buy-to-let investors have started to convert their letting businesses into limited companies in a bid to avoid harsh tax changes. These changes have had an undeniable impact on the buy-to let sector, completely revolutionising the market and what it means to be a landlord. Section 24 is a government act that attempts to reduce a landlord’s tax relief on their finance costs and subsequently the Treasury receives more funding from the buy-to-let sector as a result. In light of this act, an increasing number of landlords chose to turn their buy-to-let businesses into limited companies, denying the Treasury access to their finances and avoiding any taxation. However, it is predicted that under the Autumn Budget, the government will alter the taxation laws surrounding buy-to-let limited companies.
Longer tenancy tax breaks
The Autumn Budget may also reveal the government’s plans to introduce tax breaks for landlords offering tenancies on a long-term basis. Mandatory long-term tenancies continue to be debated in Parliament, however introducing tax breaks will incentivise landlords to offer assured long term tenancy agreements in order to tackle the current housing crisis. We can expect to get a definite answer on this matter from the Chancellor come the end of October.
Until Monday 29th October when details of the Autumn Budget are released, it is a waiting game to see what future changes could impact the property market and landlords in the UK.