On Monday, the Chancellor Philip Hammond delivered his Autumn Budget, and he announced letting relief reform and additional funding to protect those switching to Universal Credit, as it continues to be rolled out across the country.
So, what announcements did the chancellor make that are likely to affect you and your lettings business?
Letting Relief Reform
The Chancellor announced changes to Private Residence Relief on Capital Gains Tax upon the sale of a property. From April 2020, lettings relief will only apply in circumstances where the owner of the property is in shared occupancy with the tenant, in other words it will be abolished for non-resident landlords, selling properties they had previously lived in.
As well as this reform, the final period exemption is also set to be reduced, from the current 18 months to 9 months, with the Government adding that they plan to consult on these changes.
However, there won’t be a change to the 36 months final exemption period, which is available to disabled people or those in a care home.
What is lettings relief?
Currently, people who rent out a property which was previously their main residence are eligible for lettings relief.
Lettings Relief is a policy which reduces the amount of capital gains tax paid on the sale of a property. If you qualify for Private Residence Relief and have a chargeable gain, you may also qualify for Letting Relief. This means you’ll pay less or no tax. You can learn more about this here.
Remember, if you are an RLA member and you have questions relating to tax, you can visit our tax centre for expert advice.
On Universal Credit, during the Budget the Chancellor acknowledged that managed migration is a huge project, and announced a package of additional measures, worth £1 billion pounds over the next five years. This would provide further protection to those switching to Universal Credit, as it continues to be rolled out across the country.
Mr Hammond said that the Secretary of State for Work and Pensions, Esther McVey will give further details of this , when she introduces the managed migration regulations to Parliament later this year. The Budget pin points these areas of extra support for claimants, as they make the transition over to Universal Credit.
– In the Autumn Budget 2017, the Government announced that Housing Benefit claimants would receive an additional payment, providing a fortnight’s worth of support during their transition to Universal Credit. In this years Autumn Budget, the Government has announced that this provision will be extended to cover the income-related elements of Jobseeker’s Allowance and Employment Support Allowance, as well as Income Support. This is set to benefit around 1.1 million claimants and will be effective from July 2020.
– To support the transition to Universal Credit for all self-employed people, the Government is also extending the 12-month grace period (the period before the Minimum Income Floor applies) to all gainfully self-employed people; giving claimants time to grow their businesses to a sustainable level. This will be introduced from July 2019 and implemented fully from September 2020.
– From October 2019, the Government will reduce the maximum rate at which deductions can be made from a Universal Credit award from 40% to 30% of the standard allowance. This will ensure that those on Universal Credit are supported to repay debts in a more sustainable and manageable way. From October 2021, the Government will also increase the period over which advances will be recovered, from 12 to 16 months
On stamp duty, the Chancellor announced that Stamp Duty will be abolished for all first-time buyers of shared ownership properties valued up to £500,000.
Additionally, first time buyers relief in England and Northern Ireland will be extended, meaning that all qualifying shared ownership property purchasers can benefit, whether or not the purchaser elects to pay SDLT on the market value of the property. This change will apply to relevant transactions with an effective date on or after 29th October 2018, and will also be backdated to 22nd November 2017 so that those eligible who have not previously claimed first-time buyers relief will be able to amend their return to claim a refund.
The Government has also announced a consultation on SDLT charge for non-residents. This is due to be published in January, on a SDLT surcharge of 1% for non-residents buying residential property in England and Northern Ireland.
Other Housing announcements:
Help to Buy
Originally due to end in April 2021, The Help to Buy scheme will be extended for two more years.
The Chancellor also announced the commitment of £500m for the Housing Infrastructure Fund, designed to enable a further 650,000 homes to be built. With new partnerships with housing associations in England to deliver 13,000 homes.
- Keep an eye out for further coverage of the Budget from the RLA, and you can have a read of our Budget submission here.
- Want to make sure you’re kept fully informed with important announcements and legislation change that will affect your business? Become an RLA member today! Join the home for landlords at 30% off today and tomorrow in our fantastic Budget Buster offer. For £55.97 for the year you can access unlimited one to one online and telephone advice from our experienced advice team, the best deposit protection rates on the market and so much more! JOIN US today!
- The income tax personal allowance will rise to £12,500, and the higher rate threshold to £50,000, by April 2019. From this point, they will both be indexed to inflation