Posts with tag: Spring Budget

What the Spring Budget Means for the London Property Sector

Published On: March 10, 2017 at 11:10 am

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Earlier this week, Chancellor Philip Hammond delivered his first and last Spring Budget. While many were disappointed with the announcement, it may affect the London property sector.

If you’re a London landlord, homeowner, tenant or prospective first time buyer, Portico London estate agent has summarised how the Spring Budget will affect you:

Landlords

Landlords across the country will be delighted that they have not been dealt any new blows in the Spring Budget. But, unfortunately, the Chancellor did not reverse the additional Stamp Duty charge or the mortgage interest tax relief changes set to come into force next month.

Currently, landlords are able to deduct all of their mortgage interest, and other finance costs, from their rental income before they calculate their tax bill. But, as of 6th April, tax relief will be cut to 75%, and will be gradually reduced until it is replaced with a flat 20% rate in 2020.

If you have a large buy-to-let mortgage, it’s vital that you meet with an accountant to talk through the changes and make sure you’ve accounted for them. If you don’t have a mortgage or you’re a lower rate taxpayer, it’s good news – you will not be affected by the changes.

The tax changes are certainly a hit for buy-to-let landlords, but investment in the London property sector can still be extremely profitable in 2017 if you invest smartly and make the most of record-low interest rates.

However, Hammond did offer a goodwill gesture, announcing that the amount you can earn in profit before tax is payable will rise from £11,000 to £11,500 from 6th April, then to £12,500 by 2020.

Limited companies 

As a result of the forthcoming tax relief changes, a large number of landlords have set up, or considered setting up, a limited company to pay less tax. This is because, unlike individuals, limited companies can still benefit from the full mortgage interest deduction mentioned above.

But the Chancellor has clearly suggested that he doesn’t want landlords to form limited companies to dodge the tax change, announcing in the Spring Budget that the tax-free dividend allowance for company directors will be cut from £5,000 to £2,000 from April 2018. The dividend allowance cut will cost basic rate taxpayers £225, higher rate taxpayers £975 and additional rate taxpayers £1,143.

What the Spring Budget Means for the London Property Sector

What the Spring Budget Means for the London Property Sector

Self-employed individuals

Hammond also made it clear that he’s determined to make the tax system more equal for employed people, company directors and self-employed individuals, announcing a 1% increase in Class 4 National Insurance contributions from April 2018, and a further 1% rise from April 2019.

Furthermore, he plans to announce more changes to “reduce the gap to better reflect the differences in state benefits”. Portico advises you think very carefully if you’re planning on setting up a limited company, as it may not be the best move.

First time buyers

The Office for Budget Responsibility released its predictions for house price growth alongside the Spring Budget, claiming that house price growth will drop by almost half by 2019. According to its forecast, house price growth will fall from an annual rate of 7.6% in 2016 to just 4% in 2018. In 2019, growth will edge upwards to 4.4%, before increasing to 4.6% in 2021, it states.

The Regional Sales Director of Portico, Mark Lawrinson, comments: “We’ve already seen the start of this in prime central London, with the first year-on-year price drop since the crash in ‘98. It’s likely this will have a ripple effect across London in the coming years, and price growth will start to slow.

“But as the Office for Budget Responsibility has predicted, price growth will not slow for long, as this is primarily due to a chronic lack of supply; money is as cheap as it can be to borrow at the moment, so if you are hoping to get on the property ladder in London, this may be the perfect opportunity to grab a good deal and enjoy the security of owning a home.”

He adds: “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.”

Savers 

Unfortunately, Hammond did not announce any new savings initiatives. However, he did confirm the promised National Savings and Investments three-year bond (which he spoke of in the Autumn Statement last year), detailing that, as of April this year, the account will pay a fixed rate of 2.2% on deposits of up to £3,000.

Experts in the savings sector have slammed the initiative, claiming that savers would earn just “£6 a year more than they could get on the open market” – Anna Bowes, the Director of independent savings advice site SavingsChampion.co.uk.

Thankfully, there are already lots of initiatives available for those hoping to buy their own homes:

  • The Lifetime ISA will launch on 6th April. For every £1 you save into the account, the Government will contribute another 25p, and it’s all tax-free. The annual contribution limit is £4,000, which puts the maximum Government bonus at £1,000 per year.
  • The Help to Buy ISA includes a Government bonus of 25%. So, for every £200 you save, you’ll receive a Government bonus of £50. The maximum Government bonus you can receive is £3,000.
  • Help to Save, which is set to launch in April 2018, will give lower income savers who can save £50 a month a tax-free bonus of up to £1,200.

Tenants

Tenants in London were waiting patiently for news on when the Government’s letting agent fee ban will come into force. However, Hammond failed to mention the ban in his Budget. Although we do not have an exact date, a consultation is expected to take place this spring.

In conclusion, not much will change for those in the London property sector as a result of the Spring Budget announcement.

Spring Budget was “Hardly Radical Stuff” – Industry Reacts

Published On: March 9, 2017 at 9:51 am

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Yesterday’s Spring Budget, delivered by Chancellor Philip Hammond, was “hardly radical stuff”, according to a leading legal expert.

Lisa Evans, a commercial property solicitor at Kirwans law firm, has reacted to the low-key Spring Budget.

However, although the announcement itself was disappointing – especially for landlords, who were virtually left out – other changes were already planned, which mean that millions of people will be affected.

Spring Budget was "Hardly Radical Stuff" - Industry Reacts

Spring Budget was “Hardly Radical Stuff” – Industry Reacts

So how could it affect you?

Tax rise for the self-employed 

The main National Insurance contribution rate paid by self-employed people will rise in the next few years.

It will increase from its current level of 9% to 10% in April 2018, and then to 11% in April 2019 for those making a profit of more than £8,060.

The level for employees for these Class 4 contributions is 12%. The Chancellor said that this would raise £145m by 2021-22. On its own, the change announced in the Spring Budget would leave 2.84m people facing an average annual increase of £240.

As previously announced, Class 2 payments, which have a lower threshold of £5,965 or more in profits per year, will be abolished.

Reduction in tax breaks for shareholders 

Director shareholders will see a tax break reduced on the dividends they receive. The tax-free dividend allowance, which only came into force a year ago, will be cut from £5,000 to £2,000 from April 2018.

Help for savers 

A new Government-backed savings product was promised in November’s Autumn Statement, but no date or rate was set.

Now, the Chancellor has confirmed that National Savings and Investments will offer the Investment Guaranteed Growth Bonds from April, paying interest of 2.2%.

Evans reacts to the low-key Spring Budget: “This Budget is hardly radical stuff – rather another book-passing exercise.

“The £300m funds available to councils for discretional relief will, at least, give councils the power to make decisions over local businesses, but I do question how fair this will be. What one council might decide to award may be quite different to another, creating something of a postcode lottery of discretional relief. I’ll also be interested to know where the Government has found this £300m – it certainly wasn’t clear in Hammond’s speech.”

She adds: “It would seem rather than giving relief or overhauling the system, the Government’s approach is, yet again, somewhat wishy-washy. It’s almost as though they don’t want to actually tackle the issues, preferring to dip their toe in the water and then withdraw, leaving behind a half-hearted resolution and a promise to re-evaluate.”

Other property experts have also expressed their frustrations over the lack of housing initiatives in the Spring Budget: /industry-frustrated-lack-housing-initiatives-budget/

NLA Disappointed with Lack of News for Landlords in Budget 2017

Published On: March 9, 2017 at 9:12 am

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No news is generally considered good news, but that’s not the case for landlords, who were virtually left out of Chancellor Philip Hammond’s Budget 2017 yesterday.

NLA Disappointed with Lack of News for Landlords in Budget 2017

NLA Disappointed with Lack of News for Landlords in Budget 2017

The National Landlords Association (NLA) was quick to express its disappointment following the announcement, in which Hammond failed to address forthcoming tax changes for landlords.

Despite the NLA issuing its own Budget 2017 wish list ahead of the announcement, the Chancellor did not follow its suggestions and instead virtually left landlords out of the plans altogether.

The Chief Executive Officer of the NLA, Richard Lambert, responds to the Budget 2017: “The Chancellor has passed up his last opportunity to reverse the damaging plans to restrict mortgage interest relief for landlords before they hit, or even to act on suggestions as to how he might ease the immediate impact.

“Sadly, he still seems convinced by the Treasury’s analysis of the consequences, and it looks like he will only change his mind when the reality proves different.”

He explains the negative effects of this: “That’s little comfort to the landlords who will be forced up a tax bracket as a result of the changes or potentially forced out of business, nor their tenants, who will be faced either with higher rents or the struggle to find another home in an already pressured housing market.”

The latest industry forecast regarding the reduction in mortgage interest tax relief came from a former member of the Bank of England’s Monetary Policy Committee, who believes that rents could be pushed up by as much as 30% as a result of the change.

Nevertheless, Lambert was pleased with one aspect of the Budget: “However, we’re pleased the Government has listened to our calls to delay the implementation of the Making Tax Digital programme, as it has the potential to cause chaos as landlords struggle to get to grips with the demands of submitting quarterly tax returns online.”

Are you disappointed by the Budget 2017?

Property Market Predictions for Tomorrow’s Spring Budget

Published On: March 7, 2017 at 9:14 am

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Tomorrow, Chancellor Philip Hammond will deliver his first full Spring Budget – the first since the EU referendum. So what are the property market predictions for the announcement?

As the nation waits to see what new measures will be pulled from the red briefcase, the CEO of online estate agent eMoov.co.uk, Russell Quirk, has noted that little has been talked about regarding property.

He explains: “As always, there are many predictions around what Wednesday may bring for the UK economy going forward, but, disappointingly, the current property crisis doesn’t seem to feature very heavily. It says a lot when the most traction leading up to this Budget has been gained by a petition started by a member of the UK public, not the Government themselves.

Property Market Predictions for Tomorrow's Spring Budget

Property Market Predictions for Tomorrow’s Spring Budget

“We wait in hope that Mr. Hammond is keeping his cards close to his chest and that he has something up his sleeve for UK buyers, in particular. That said, based on the initial handover of the baton from his predecessor George Osborne, it would seem the head-in-the-sand mentality remains prevalent within this Government where the UK property market is concerned.”

He adds: “As we have come to expect from politicos, much of the property flavour of Wednesday’s Budget is likely to be regurgitated announcements that they hope will continue to grab a headline or two despite being old news. It is this kind of initiative recycling that we saw in the recent Housing White Paper and is seemingly housing market de-rigueur these days.”

He looks into the different areas that may be brought up in tomorrow’s Spring Budget:

£1.5m+ market

“It is looking likely that a slight reprieve to the top end of the market where Stamp Duty tax is concerned may be the only real implementation of something new. The UK market has remained strong through testing times since the last Budget, but the high-end sector has taken a real kicking where buyer demand is concerned. Whilst the Government is making more in Stamp Duty tax on each sale, the sharp decline in transaction volumes above £1.5m have resulted in the Government actually making less money, and Mr. Hammond should adjust his housing policies based on this post-Brexit evidence.

“In light of this significant reduction in high-end transactions, there is a real danger of a trickle down issue within the market in that, if buyers of £1.5m+ homes are disincentivised, then they won’t sell to begin with. This then congests the market at the £1m bracket and so on, preventing homeowners at all stages progressing up the ladder.

“This Government is a Conservative Government and should be promoting aspiration rather than penalising it, and they must realise those that have attained the ability to buy a six-figure home are no longer the property elite in their luxury mansions, but the average family in many London areas. It is time the Chancellor understood this and the mechanics of the fragmented UK market in order to make a meaningful change to aid them.”

Stamp Duty

“What he needs to do is turn Stamp Duty on its head or eradicate it altogether. It is an archaic tax introduced to help fund a war against France many moons ago. Now that the Anglo-French relations are back on good(ish) terms, the anti-homeowner tax only heightens the mountain faced by aspiring UK buyers when trying to get on the ladder.

“Pivoting Stamp Duty so that it is paid by the seller would assist those beleaguered first time buyers, particularly those in the South East, who currently pay nearly £6,000 just for permission to jump onto the housing ladder in one of the UK’s most expensive areas.”

Right to Buy

“Finally, as already mentioned, it is likely that a fresh set of bells and whistles will be added to an existing initiative to help first time buyers, probably via the Right to Buy initiative. Anything hailing from the ‘to buy’ family seems to materialise from the best intentions, but soon fade into insignificance when it comes to making an impact.

“Help to Buy has been woeful in addressing the housing crisis and, if anything, has helped to fuel demand in a supply constricted environment, which in turn has pushed prices further out of reach from would-be buyers. Now it would seem councils are also being skittish, to say the least, when it comes to the transparency around how many homes they are actually building with Right to Buy money.”

What do you want to see in tomorrow’s Spring Budget announcement?

Accountants Explain What they Want to See in the Spring Budget

Published On: March 2, 2017 at 11:21 am

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Leading accountants from Blick Rothenberg have outlined what they want to see from the Chancellor in next week’s Spring Budget, and why.

The firm’s newsroom is up-and-running, providing tax commentary, technical analysis and an interview service for journalists before, during and after the Spring Budget on Wednesday 8th March.

However, the accountants are already looking at what Chancellor Philip Hammond could, should and shouldn’t do:

Savings

  • Should extend the Lifetime ISA to people over the age of 40, so that they can still open one and help save towards their retirement.
  • Should extend the time that someone can contribute to a Lifetime ISA to retirement age, not 50.
  • Should reintroduce tax relief on mortgage interest, but for first time buyers of properties under £450,000 in Greater London and £250,000 elsewhere, to help offset the cost of buying their first home.
Accountants Explain What they Want to See in the Spring Budget

Accountants Explain What they Want to See in the Spring Budget

Pensions

  • Should scrap the phased reduction of the pension annual allowance; people need to be encouraged to save for the future in order to be self-sufficient in retirement and not rely on the state pension. This could be simplified by making the pension allowance a flat £25,000 and the ISA allowance also a flat £25,000 for everyone; taxation is a less volatile component over the personal lifecycle.
  • Could cap the amount that can be withdrawn from pensions tax-free at retirement.

Property/Stamp Duty Land Tax (SDLT)

  • Should use the tax system to boost the supply of affordable housing by introducing capital taxation reliefs to incentivise landowners and developers to assist local authorities in meeting their affordable housing targets.
  • Should allow mortgage interest tax relief for landlords that supply low cost/affordable housing.
  • Should introduce a 20% Capital Gains Tax (CGT) rate on property sales made to first time buyers of properties worth less than £450,000 in Greater London and £250,000 elsewhere.
  • Should scrap SDLT and CGT/Corporation Tax on the sale of land for residential development where the landowner/developer jointly works to meet local authorities’ targets on affordable housing numbers. This could be extended to all land where reasonable mixed use is evident, such as shops, schools and doctors’ surgeries. No distinction between greenfield and regeneration land, but greenbelt land should remain subject to tax. Truly redundant commercial buildings, such as telephone exchanges, ex-airfields, mills, etc. should also be converted or developed into housing.
  • Should significantly increase the 10% threshold for SDLT from £925,000 to £1.5m, or even £2m (to the sort of level originally regarded as mansion tax).

National Insurance (NI) and Income Tax

  • Could align NI and Income Tax rates so the least well off are taken out of paying NI.
  • Could increase employers’ NI to 15% on salaries paid to executives over £150,000 per year, to try to discourage corporates paying most of the wages to a few highest paid employees.
  • Could decrease employers’ NI to 10% on salaries paid to employees on the living wage, to both encourage employers to pay the living wage and help offset the cost.

Corporation Tax

  • Could further accelerate Corporation Tax payment dates for the largest companies.
  • Could reduce Corporation Tax further to encourage businesses to establish in the UK. The quid pro quo to this is that HM Revenue & Customs (HMRC) might increase the Corporation Tax rate for investment companies to keep the overall yield, particularly those holding fixed asset real estate.

What do you want to see in the Spring Budget next week? Both the RLA and NLA have issued their own wish lists already.