Chancellor of the Exchequer George Osborne’s Budget announcement included few surprises for the Private Rented Sector (PRS), landlords and tenants.
Here we look at how the the proposals affect landlords, the private rented sector and taxation.
Stamp Duty land Tax
The Autumn Statement 2015 announced that from 1st April 2016, higher rates of Stamp Duty Land Tax (SDLT) will apply to purchases of additional residential properties, such as second homes and buy-to-let properties. The higher rates will be 3 percentage points above the current SDLT rates and will apply to purchases of additional residential properties in England, Wales and Northern Ireland.
Following consultation, the Government has decided:
- To help those moving in difficult circumstances, purchasers will have 36 months rather than the originally proposed 18 months to either claim a refund from the higher rates or before the higher rates will apply, in the event that there is a period of overlap or a gap in ownership of a main residence.
- There will be no exemption from the higher rates for significant investors, and the higher rates will apply equally to purchases by individuals and corporate investors.
- To view the draft legislation to implement the changes click here.
- The Government’s impact assessment on the SDLT changes is available
The assessment notes that:
- The measure is not expected to have any significant macroeconomic impacts.
- The costing accounts for a behavioural response whereby the volume of affected transactions is reduced. It should increase the amount of owner-occupied properties.
- Around 10% of residential property transactions are expected to be subject to the higher rates.
- HMRC will have to make changes to IT systems to implement this measure, at an estimated cost of £400,000. Staff costs of administering this change are estimated at £1.5 million a year.
The summary of responses to the SDLT consultation is available here.
In addition to what is in the red book it reports that:
- The Government has decided that married couples who are living separately in circumstances that are likely to become permanent will not be treated as one unit for the purposes of this policy.
- The Government has decided that when applying the higher rates, a small share (50% or less) in a single property which has been inherited within the 36 months prior to the transaction will not be considered as an additional property.
- The Government will legislate for the changes in Finance Bill 2016 and the higher rates will apply to purchases which complete on or after 1 April 2016.
HMRC has published guidance which can be viewed here.
Capital Gains Tax
The Government will provide £60 million of the additional receipts from higher rates on additional residential properties to enable community-led housing developments, including through Community Land Trusts, in rural and coastal communities where the impact of second homes is particularly acute.
The Budget announces that, from 6th April 2016, the higher rate of Capital Gains Tax (CGT) will be reduced from 28% to 20%, and the basic rate will be reduced from 18% to 10%. There will be an 8 percentage point surcharge on these new rates for carried interest and for gains on residential property. This will, the Treasury argues, ensure that CGT provides an incentive to invest in companies over property. Private Residence Relief will continue to ensure that an individual’s main home is not subject to CGT.
Funding for New Housing
The Government will extend the Private Rented Sector guarantee scheme until December 2017 to encourage long term institutional investment in the private rented sector.
- The Government’s intention is for the welfare cap to be met by the end of the Parliament when the OBR conducts its next assessment at Autumn Statement 2016.
- From Autumn 2016, the Government will introduce exemptions from the household benefit cap for recipients of Guardians Allowance, Carer’s Allowance and the carers element of Universal Credit from the household benefit cap, which caps the amount of benefits out-of-work working-age families can receive at £20,000, and at £23,000 in Greater London.
- The government will delay the ending of the payments of Housing Benefit and Pension Credit to claimants who travel outside of Great Britain for longer than 4 weeks consecutively. This will now come into force in May 2016.
Full details of the Government’s budget can be found in the Red Book.