On a superficial level, the Spring 2017 Budget, delivered by the Chancellor Philip Hammond on the 8th March, seemed not to hold much interest for the property sector.
A number of commentators observed that he only mentioned the word “housing” once throughout his hour long speech. This did cause some consternation amongst property professionals, as the Budget 2017 came hot on the heels of the Housing White Paper and it was expected that housing would be a key topic.
Additionally, landlords were hopeful that the stamp duty surcharge might be removed or diluted in some way, and that Section 24 would get some positive amendments.
Unfortunately, neither proved to be the case.
The headlines were as follows:
Making Tax Digital –
The introduction of the digital tax reporting system for businesses below the VAT threshold will be delayed for one year, following concerns raised by small businesses. This will apply to most landlords.
Douglas Haig, Vice Chairman of the Residential Landlords Association commented:
“The RLA has long called for more time to enable landlords to properly implement this radical change to the system of administering tax.
“Whilst we support efforts to improve the efficiency of the system, faced with unhelpful changes to the way they will be taxed, the last thing landlords needed was an imminent change to the way they keep their records.
“The Chancellor has made the right decision in giving landlords more time to prepare for this important change.”
National Insurance –
Consultation in summer to address the disparity between NICs of self-employed and employed.
From April 2018…the main rate of Class 4 NICs for the self-employed will increase by 1% to 10%, with a further 1% increase in April 2019.
This could affect some landlords decisions of whether to incorporate or not, so it is worth running the numbers here.
Corporate taxation –
Hammond stated that he did not want people forming companies to avoid tax, which is what many landlords have done to mitigate Section 24. We fear that we have not heard the end of this in relation to incorporated landlords!
Corporation tax will fall to 19% this April, and will then fall to 17% in April 2020.
The tax free dividend allowance for company directors will be reduced from £5K to £2K from April 2018.
The personal allowance will rise for the seventh year in a row to £11,500.
However, there were some points of interest for landlords in the small print of the Budget document, that were not read out in the speech:
Offshore property developers –
The government will amend legislation to ensure that all profits realised by offshore property developers developing land in the UK, including those on pre-existing contracts, are subject to tax, with effect from 8 March 2017.
Rent-a-room relief –
The government will consult on proposals to redesign rent-a-room relief, to ensure it is better targeted to support longer-term lettings. This will align the relief more closely with its intended purpose, to increase supply of affordable long-term lodgings.
Currently the Rent A Room scheme allows people letting out rooms in their homes to lodgers can currently earn £7,500 tax free; this also applies to those letting rooms through Airbnb and similar sites.
RLA research shows there are more than 23,000 rooms listed on Airbnb in London alone.
The association says that as Rent A Room was introduced to increase the supply of affordable long term lodgings it would appear the government review is taking place in direct response to the popularity of short term letting sites.
“Promising a consultation on redesigning the relief in the Budget Red Book the government says it will be looking at the way Rent A Room operates to ensure it is better targeted to support longer term lettings, reflecting its original purpose” says a statement from the RLA.
All in all the Budget hints that private rented sector issues are still very much on the Government’s radar, and it could be that the Spring Budget was just a “warm up” for the main event in the Autumn!
To find out more about the impact of Section 24, visit the newly-launched Tenant Tax website.
The full Budget 2017 document is now available: BUDGET 2017
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