UK Budget 2016 – No Surprises! For Buy-to-Let Property Investors

Investment News - In this week's Special Report - UK Budget 2016,

Brett Alegre-Wood looks at the pro's and con's of the 2016 UK Budget and in particular how it affects you property investments.

Rather than what could have been a further digging in of the spear, the budget was more like a candy shop owner giving away his candy. So no surprises in this case, which is good news as the previous announcements were enough.

Why not download my free ebook on the tax changes and how they will affect you as a buy-to-let property investor below.

The budget 2016 review video transcript will be up in a day or so.

Here's a copy of the video Transcription:

Hey, guys. Welcome to this special edition of the Budget 2016. I'm Brett Alegre-Wood, author of the best-selling book, 3+1 Plan, and Chairman of Gladfish.

Okay, so last night, no surprises. No surprises, nothing negative for our property investors. Now, I say that, but that's because most of the bad news was released back in the autumn statement. The bad news from the autumn statement, that's still there. But actually, last night was like a kid in a candy store. He was giving away stuff left, right and center. So actually, things got better. So, what he took away with one hand, he gave back a little bit with the other. Whether he's going to budget and actually reach all these targets...he's missed targets, he's even gone back on his own rules. So actually, do we trust him? Probably not really, but then again, show me a politician we do trust.

Look, so autumn statement was the bad news. Last night was pretty much all good news. There wasn't too many surprises certainly for property investors, and for the average person on the street. If you drink a lot of sugary drinks, yeah, maybe you're gonna pay a bit more for that. Well, you probably will pay a bit more for that. But yeah, overall no surprises. All positive. So yeah, let me go into a bit more detail.

So, GDP, Gross Domestic Product, that's down. And basically, what he mentioned was a dangerous cocktail of risks. And the reality is, they are out there and they always have been out there. Are they going to affect us? That's anyone's guess. So, having a portfolio structured and strategized well, as always is important, okay? So yes, things may decrease in terms of GDP over the next few years, depending on the risks. But overall, it's not that negative, okay? What needs talking about is rather than having the surplus which he wanted to by '18, he's now saying the surplus is in 2020. So, he really has put his reputation there, because obviously he wants to be Prime Minister in the next Parliament, so he really needs to get that happening. If he can do that, then he may make Prime Minister. Personally, I think put Boris in. He's a lot better person, but yeah.

Corporation tax dropped to 17% in 2020. So, if you remember, it was dropped to 18. He's now gone further to 17%. So, that's actually good news. That brings it very much in line with it being a competitive economy, especially with the likes of the Singapores and the Hong Kongs. And really, I wouldn't say tax havens at all, but in terms of where major multinationals want to house themselves, Britain will become that and will maintain that. So, we won't be losing any major corporations because of that, that's for sure.

Other things, so infrastructure. I mean, infrastructure for me is such a fundamental thing if you want to create jobs and really, really recreate things. We talk about the northern powerhouse. You know, the northern powerhouse, how we really want to get things restarted. You know, London's doing fine, but the north, that's still been struggling. And it still is struggling and has been for a good decade now. So, things like High Speed Rail 3. Now, that's the one that goes from Manchester to Leeds. So effectively, it's the east-west corridor. High Speed Rail 1, which was obviously the Channel Tunnel, 2 was pretty much the M1 corridor going up from pretty much London all the way up north, okay, and splitting. That was High Speed Rail 2. That's not until 2033.

High Speed Rail 3, that's a lot smaller, okay? And so, that'll be in a lot sooner. We haven't got dates yet. Crossrail 2 has already been approved as well, which is great news. So, that's Crossrail 1 was the one which goes east to west. This one actually goes from northeast to southwest, so pretty much cuts through London in that way. You know, infrastructure like this is great, because it's going to be able to move more people. Also, if you've got properties around those areas, we've seen what happened with Crossrail. Property in those areas will go up, and will be more desirable because of the fundamentals changing. You know, there's an extra $700 million for the flood defenses there, and considering so much of Britain is actually flood prone, that's a great thing always.

So, you know, from that side, that's pretty much all the news there is from our side. There's still the 3% stamp duty for buy-to-let investors, okay? There's still the mortgage deduction. So I think which means from 2017 to '18 you're only going to be allowed a...sorry, you're allowed 100%,, 100% for that year, '18 and '19 is 75%, '19 and '20 is 25%. And then basically, it drops to nil after that. And when I say nil...sorry, not nil, 20%. In other words, you're allowed 20% deductible on your profits...sorry, on your mortgage, okay? That's a real kicker for me. That means that you really need to have a look at your portfolio and how it's structured, and how your mortgage debt is. And by looking at that sort of stuff, work out where you're at. So, that's something to speak to our portfolio managers about. But really, we've got five years to adjust to that. And when you consider the growth over that period, I don't think it's going to be a major dramatic change in the industry.

You know, the big thing with all that tax change is the stamp duties and all those sort of bits of pieces, is that I've actually written an e-book about it. It will be due out in about two weeks, okay? We're just finishing the covers and that sort of stuff of it. So, get a copy of that. And it will explain in simple terms from a property investor's terms, lots of examples. I've spoken to various accountants around the place to get their take on it. And now that the Budget has come out last night, with no new things or no changes to that, pretty much that's set in stone as much as it will be.

So guys, overall, it was good news last night. There wasn't really any negative. You know, house prices are still predicted to go up. So really, as much as some people were saying, "Buy-to-let's dead," it's not dead. You've just got to be careful about your cash flow with respect to the mortgage deductibility. But apart from that, guys, all good. Steady as she goes, watch cash flow as usual, but we should be getting some good capital growth over the next few years. And the great thing is, the north, when we talk about the northern powerhouse, the north areas outside of London are taking off and will be taking off, okay?

So, overall good news. 

Live with passion and fun,

Brett Alegre-Wood

Brett Alegre-Wood
March 17, 2016

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