Stop press! What the Autumn Budget means for property investors

Brett Alegre-Wood
November 23, 2017

What was expected, what was announced, and what it means to you

The Autumn Budget, Wednesday 22nd November, held out a lot of promises for property investors. Some good, some bad. In this article, you’ll learn exactly what the market was hoping for at best, what the Chancellor announced, and what it all means to you as a property investor.

Stamp duty

The speculation:

Property market experts, investors, and economists had all been targeting the possibility of a major review of the stamp duty on residential property. Certainly, the slowdown in the housing market has at least partly been blamed on higher stamp duty rates. In particular, the 3% surcharge on additional properties has not been good for property investors.

The problem the Chancellor has is that stamp duty revenues have been higher than they have ever been, despite the fall in the number of property transactions. But perhaps a cut in the stamp duty rate would increase the number of transactions and balance the equation?

Possible measures proposed by market watchers ahead of the Budget included:

  • Scrapping stamp duty for first-time buyers and/or pensioners
  • Switching liability from the buyer to the seller
  • Removing the additional property stamp duty surcharge
  • Making stamp duty payable in instalments, rather than in one hit as it is currently

What the Chancellor announced:

A limited response, scrapping stamp duty for first-time buyers when paying up to £300,000 for a property, and no stamp duty on the first £300,000 of a first home up to £500,000.

What this means for the property investor:

No change from the current situation, except that first-time buyers should find it easier to buy a home. It could be that sellers attempt to raise selling prices by a few percentage points, knowing that first-time buyers no longer need to pay stamp.

Mortgage interest tax relief

The speculation:

Mortgage interest tax relief is being phased out at the higher rate and will be fully reduced to basic rate tax bands (currently 20%) in 2020/21. Landlords who are higher rate taxpayers would benefit from a repeal of this measure.

What the Chancellor announced:

Considered highly unlikely before the Budget, it turned out to be just that, with no change or reversal announced. Buy-to-let landlords should continue to plan for this change – for example, by exploring sharing of properties with spouses and investing under a limited company structure.

What this means for the property investor:

No change. You should still review your portfolios and structure of holding property, to ensure that your income tax liability is minimised.

Capital gains tax

The speculation:

Whenever an investor sells a property, they will have a potential capital gains tax liability. It has been suggested that any capital gains tax payable may be ‘rolled over’ should the proceeds be used to invest in another property.

What the Chancellor announced:

Capital gains tax allowances were held, and no change in how capital gains tax is charged on property sales was announced.

What this means for the property investor:

A blow to those hoping that a rollover of CGT would be allowed, but this was not to be. Perhaps next year…

Incentivisation of longer tenancies

The speculation:

The government wants to make the rental environment better for tenants. With a rapidly increasing private rented sector, it’s a vote-winner. Sajid Javid, the Secretary of State for Communities and Local Government, hinted that the Budget might include tax breaks or other measures to encourage longer tenancies. He said:

“All landlords should be offering tenancies of at least 12 months to those who want them. That is why, at the Autumn Budget, we will bring forward new incentives for landlords who are doing the right thing.”

What the Chancellor announced:

No firm policies yet, but he did announce a consultation on barriers to longer tenancies (for example, mortgage lenders’ refusal to allow them).

What this means for the property investor:

Longer tenancies are probably on their way, but until there is a positive announcement, buy-to-let landlords should continue with their current tenancy length policies. If there is a ruling on this in the future, you want to be in a position to benefit from any incentives offered by the government.

Energy relief for buy-to-let landlords

The speculation:

From April 2018, landlords will have to adhere to the new minimum energy efficiency standards (MEES). Properties that you let out must have a minimum energy rating of E. (Read about these new requirements in this article: “The buy-to-let landlord’s SWOT analysis of minimum energy efficiency standards”.)

To make sure your properties comply with these regulations, some will need to be improved. It costs money. To help with this cost burden, leading industry experts including ARLA’s Propertymark have suggested that the Chancellor should reinstate the Landlord’s Energy Savings Allowance (LESA).

What the Chancellor announced:

Nothing. Not a sausage.

What this means for the property investor:

Bad news for landlords. There really was hope that there would be something for landlords here, but unfortunately not. Still, energy efficiency is something that you must consider. We’d recommend that you retain all the paperwork, invoices and receipts, as part of the records that property investors should keep. And, of course, act to increase the rent you charge to reflect the better energy efficiency of your property.

Other measures

The speculation:

As the Budget neared, the market was awash with speculation of other measures that the Chancellor might take. These included committing funds to residential development, increasing housebuilding targets, making first homes more affordable, and providing support to smaller developers.

What the Chancellor announced:

The Chancellor has announced some massive funding (including for current plans) to try to tackle the ‘housing crisis’. It includes:

  • A total funding of £44 billion to support the housing market over the next five years
  • The target of building 300,000 new homes per year by 2025/6
  • A doubling of the infrastructure fund, with an extra £2.7 billion
  • Focus on urban areas, and the release of inner city land while protecting greenfield
  • Concentrating on enabling high-quality, high-density homes where people want to live

He has also announced that the government will seek to close the gap between the number of planning permissions and new build starts, with a report due by around March 2018. It is not ruling out actions such as direct intervention and executing compulsory purchase orders to get developers to build.

There is also money to support small and medium-sized developers.

What this means for the property investor:

Investors should find that they have extra investment opportunities near transport hubs and major employment centres. And that’s good news.

Overall, pretty much as status quo. There isn’t anything in this budget that is really bad news for property investors, but neither is there anything that is great news. The takeaway is that property investors should still plan for the phasing out of mortgage interest tax relief at the higher rate, and make sure that they allow for CGT when selling a property, and stamp duty when buying property.

Of course, every investor’s circumstances are different. What we’ve described as the outcomes for property investors is general commentary. Contact one of the Gladfish team today on  +44 207 923 6100, and learn what the Autumn Budget means for you uniquely and the strategies you can put in place to benefit from the good news and mitigate the bad.

Live with passion,

Brett Alegre-Wood


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