What the Budget means for you
In light of the recent Spring Budget, delivered earlier this week by the Chancellor Philip Hammond, Portico Estate Agents in London have released a synopsis of how the Budget will affect landlords, homeowners, tenants and those trying to get onto the property ladder.
If you are a landlord:
Landlords may be happy that no new property taxes have been announced however the Chancellor did advise he wouldn’t be withdrawing the additional stamp duty charge or mortgage interest tax relief changes which are due to be introduced in April.
At present landlords can offset their mortgage interest and agent fees from their rental income before calculating their tax bill. From 6th April 2017, tax relief will be set at 75% and gradually reduced until 2020 where it will be replaced with a flat rate of 20%.
Although the changes are a hit to buy-to-let landlords, Mr Hammond did offer an ‘olive branch’ by raising the mount earned in profit before tax is due from £11,000 to £11,500 from 6th April and further to £12,500 by 2020.
It was also announced that the Chancellor would be cutting the tax free dividend for company directors from £5,000 to £2,000 from April 2018 to discourage landlords forming companies to avoid the tax hit. Landlords contemplating setting up a limited company should consider their options before deciding as this may not be the best way to reduce interest costs.
If you are self-employed:
The Chancellor made it very clear that he wishes to “reduce the gap to better reflect the differences in state benefits” and is determined to make the tax system equal for the employed and self-employed. From April 2018 there will be a 1% rise in Class 4 National Insurance, rising by a further 1% in April 2019.
If you are saving to get onto the property ladder:
The Office for Budgetary Responsibility have predicted that the UK house price growth will have declined by 2019. They have predicted that house prices will fall from an annual inflation of 7.6% in 2016 to as little as 4% in 2018. However, the OBR believe they will rise again to 4.4% in 2019 and further to 4.6% by 2021.
The decline in growth is not thought to last for long as it is largely due to the lack of housing supply. Borrowing is cheap at the moment therefore this may be an opportunity for anyone looking to get onto the property ladder to secure a good deal.
Mark Lawrinson, Regional Sales Director at Portico, said: “Unfortunately nobody can predict the future, so if you’re in a position to buy today then don’t hesitate; remember you’re buying a home first and an investment second”.
The Chancellor did confirm in his Budget the National Savings & Investments 3 year bond, advising that from April a fixed rate of 2.2% will be paid on deposits up to £3,000.
Director of SavingsChampion.co.uk, Anna Bowes, has criticised this initiative saying: “savers would earn just £6 a year more than they would on the open market”.
If you are a Tenant:
The Chancellor may have failed to mention the letting fee ban in his Spring Budget which means we still don’t have an exact date for when the change will be implemented however the consultation is due to take place in the coming months.
Full article is available on Portico: https://www.portico.com/blog/