If you have read the news lately, it has primarily been dominated by the big ‘B’ of Brexit, however, there has been another big ‘B’ we should be aware of and that is the Autumn 2018 Budget.
By now, you will have heard and read about Chancellor Philip Hammond’s 2018 Budget update. Hammond opened the 2018 Budget, with a confident prediction that it would “open a new chapter in our country’s economic future.” This can leave many people pondering on how it will affect them and their businesses and families.
If you are you wondering exactly how this will directly affect you as a property investor then read on as we will outline the most important changes that you’ll need to know about, from changes to tax bands, important information regarding foreign nationals, changes to stamp duty as well as changes to Capital Gains Tax.
In the Autumn Budget, changes to tax bands were discussed regarding the 2019/2020 year. The personal tax-free allowance where the 40% higher tax is applied will rise from £46,350 to £50,000. Although it may seem small and many landlords were dismayed by the news, we have to be positive as this is still an increase on last year’s figure. Also important to note, is that the threshold for VAT registration will remain unchanged for two years. Read our post to discover if it is worthwhile to invest in property via a limited company rather than as an individual.
In the Autumn Budget, the Government has stated that it will extend first-time buyer’s Stamp Duty relief in England and Northern Ireland to shared ownership properties, regardless of whether the purchaser chose to pay Stamp Duty on the market value of the property. This will even be eligible to be backdated to 22 November 2017, so that all of those who were not previously eligible can claim a refund.
Read about the other Stamp Duty change announced by Prime Minister Theresa May at the beginning of October, to the effect that foreign investors will be subject to higher charges.
In the Autumn Budget, there was an important update regarding non-UK residents and international companies. It is vital to note that all non-UK residents and international companies that are intending on buying and investing in property will also be taxed on indirect disposals of UK land. These rules will apply when a person makes a disposal of an entity that derives 75% or more of its gross asset value from UK land. An exemption will be made available for investors in such entities who hold less than 25% interest.
There will be options available in order to calculate the gain or loss on a disposal using the original acquisition cost of the asset, or by using the value of the asset at commencement of the rules in April 2019.
Another aspect of the Autumn 2018 Budget was that all non-UK resident companies will be charged Corporation Tax rather than Capital Gains Tax on their gains. The Capital Gains Tax charge relating to the Annual Tax on Enveloped Dwellings will be abolished. The legislation will broadly come into effect for disposals from the 6th April 2019.
Capital Gains Tax:
In the Autumn Budget, there were changes regarding Capital Gains Tax. This is especially important information for landlords as the relief that’s been granted reduces Capital Gains Tax on the sale of properties that have previously served as the landlord’s personal residence, but, which are currently being used to let out to tenants as their residential accommodation. This relief sees a maximum exemption of £40,000 per owner.
However, it is important to highlight that from April 2020, this exemption will only be available for landlords who live inside the property with the tenants. There hasn’t been any information regarding single tenants, so we assume that live-in landlords with only a single tenant are not eligible for the lettings relief, meaning that this will only apply towards accommodation with two or more people renting rooms, unless we hear clarification from the Government on this.
Read more about the various taxes property investors face here.
Are you a property owner? Great news, the time period between ceasing to occupy a house and final sale has been reduced from 18 to just 9 months. Though this change does exclude sellers who are disabled and/or who are living in a care home, they will continue to receive the 36-month exemption.
In the Autumn Budget, there were some interesting pieces of news regarding the wider housing industry market. Firstly, The Housing Infrastructure Fund will increase by £500 million, bringing the total to a figure of £5.5 billion. There will also be £8.5 million available in order to allocate land for affordable housing. This is great news for property investors looking to expand their portfolios.
Secondly, you may be aware that Sir Oliver Letwin was asked to investigate why it takes house builders such a long time to complete large housing developments after statistics revealed that just over half of the 684,000 homes with planning permission that was granted in July 2016 had actually been completed. The findings of his investigation were that “the idea that housebuilders are behaving like financial investors, speculating over future land values, is not compatible with how they run their businesses. Housebuilders’ profits are generated from selling homes, not from an increase in the value of land” he argues. The Chancellor agreed that the review did not find evidence that major house builders are engaging in land speculation as part of their business model.
Lastly, The Office for Budget Responsibility believes that GDP growth will be 1.6 per cent in 2019, up from previous forecasts of 1.3 per cent; 1.4 per cent in 2020 (up from 1.3 per cent); 1.4 per cent in 2021 (unchanged); 1.5 per cent in 2022 (unchanged); and 1.6 per cent in 2023. This steady growth can only mean good things for property investors.
To conclude, 2019/2020 seems like there will be a positive outcome forecast for property investors with plenty of reliefs including changes to Capital Gains Tax, increased tax bands, more money being delivered into investment funds, as well as Stamp Duty being extended.
Here at Aspen Woolf, we can help you with your property investment journey, whether you’re at the beginning or if you already have a vast portfolio, we have an expert team who are ready to hear from you today.