Landlords have been dealt a sucker punch. Hold on, actually they’ve had two today! So what did George say in today’s budget that had landlords reeling on the ropes? Well the message appeared to be: ‘ I have every sympathy for young people saving for homes and I want to tax anyone who purchases a buy to let. ‘ That’s it in a nutshell. George Osborne wins by a knockout!
So in reality what does this March 2016 budget mean for landlords?
You can expect an increase of 3% stamp duty if you buy in excess of 15 properties or any property purchased that does not fall into the buyer’s main home category.
Residential property will be taxed at the normal current rate. This is even though capital gains tax for most people will be slashed by 8% to go down to 20% . The basic rate also reduced by the corresponding amount to 10%. So landlords are excluded. Therefore investment properties attract 28% rating.
Under 40s get a savings boost with the Under 40s New Lifetime ISA as an encouragement to save for a home.
What effect will March 2016’s budget have on landlords and tenants?
It’s fascinating. Whatever we do has a knock on effect. Popular opinion suggests landlords are hogging the market for themselves and not giving enough opportunity for first time buyers to join the property market. Great, let’s stop all tax breaks and tax the buy to let market, that will sort it; unlikely, dear Chancellor. Buy to Let landlords may well go to ground. They stop buying properties to let and then what happens? There’s a potentially massive impact on housing investment. Buy to lets often fund construction. The buy to let investor is crucial to the housing ecosystem. But hey, let’s kill them off anyway and also fine them up to £3000 if they make a mistake on the Right to Rent legislation.
What happens if landlords do become a dying breed?
The rental sector is embedded in the economy, of course it is. In cities such as London renting is THE only way young people can afford to live within this metropolis. When the government removes relief and wades in with a tax hike what are landlords going to do? They are hardly likely to increase their portfolio. Therefore we may well see less property available to desperate tenants and fewer houses being built too. Perfect, job done then, George.
The Association of Residential Letting Agents (ARLA) had something to say too and were disgruntled regarding the punitive taxation, stamp duty increase, capital gains and mortgage interest relief which all adds up to what they might term, ‘a catastrophe’.
Is it really all doom and gloom for landlords?
Well, no it isn’t. If you let on a short-term basis using sites such as Airbnb then you have £1000 worth of income to keep without being taxed. It’s all to do with encouraging entrepreneurship apparently. We may have been a nation of shopkeepers once upon a time, but now we are a nation of private, micro entrepreneurial landlords! Spare room renters will certainly be happy, having also been offered an increase in their allowance for renting a room, back in July. The other plus is that income over £1000 can be declared after allowance deduction.
Landlords may well have to pay additional taxation but they now need to work smarter to cut costs elsewhere. Consider the fees paid to letting agents or ad hoc maintenance staff. These are two moveable feasts that can be transformed to become something a little more palatable. What if there was a way to save at least a month’s rent per year on every property? What if you could find a system that worked far more cost effectively and more efficiently? This is the practical way to combat the chancellor’s penalties.
If that sounds like a potential option you might want to see just how a digital disruptor is on the side of landlords. In minutes you can calculate just what you can save on every property you let through Howsy. Now’s the time to take back financial control of your property portfolio. Cheers, George!
The full list of the Budget 2016 key points