What is Autumn Budget statement having in store for buy-to-let landlords?
Ideas are floating around as potential proposals in this month’s Budget, including financial incentives for those offering longer tenancies.
With housing high on the political agenda, the Chancellor Philip Hammond is expected to focus part of his Budget statement on buy-to-let. So what changes might we see?
There would be some possible scenarios to consider :
Capital Gains Tax breaks?
Landlords could receive Capital Gains Tax (CGT) relief if they sell a rental home to a sitting tenant, who has lived in the property for at least three years.
The concept has been put forward by think-tank Onward, which indicated further tax changes could take place if its recommendations are followed by the government.
Changes to CGT filing requirements
Draft legislation, originally announced three years ago, could be dealt with, changing the amount of time that landlords and second-home owners have to pay any capital gains tax liabilities.
At present, landlords can postpone payments until filing a tax return for that particular tax year – which may mean nothing is paid for 18 months.
However, government plans would see CGT profitable tax due within 30 days of any sale.
Stamp duty to rise?
In the summer, James Forsyth, political editor at the Spectator – and closely aligned to government, wrote an article for The Sun newspaper, suggesting that buy-to-let stamp duty, currently 3%, could be increased in order to generate further Treasury funds.
Changes to CGT filing requirements
Draft legislation, originally announced three years ago, could be actioned, changing the amount of time that landlords and second-home owners have to pay any capital gains tax liabilities.
At present, landlords can postpone payments until filing a tax return for that particular tax year – which may mean nothing is paid for 18 months.
However, government plans would see CGT profitable tax due within 30 days of any sale.
Stamp duty increase ?
The buy-to-let stamp duty, currently 3%, could be increased in order to generate further Treasury funds.
Changes to limited company taxation of buy to lets?
The Section 24 changes to mortgage interest tax relief have had a profound impact on parts of the buy-to-let industry, with many landlords deciding, rightly or wrongly, that it will be more tax advantageous for them to incorporate their businesses.
Firstly, anyone thinking of making this change should consult a tax expert first, as circumstances vary from individual to individual.
From a government perspective, Section 24 is in effect an attempt to reduce landlord tax relief on mortgage interest payments, meaning the Treasury has more funding from buy-to-let.
However, the taxation of limited companies is different and whilst it is questionable whether many landlords are better off by incorporating, many have taken this step and the limited company element of the buy to let market, has grown both in the number of applications and products available.
So-called ‘tax loops’ which deny the Treasury finances, are often closed down, so it might not be beyond the realms of possibility, that the Government changes the taxation of limited company buy to let.
Tax breaks for longer tenancies?
The government plans to introduce compulsory longer-term tenancies, continues to be debated in Parliament.
For a year now, it has been mooted that landlords could receive tax breaks as an incentive to offering longer tenancies.
This has yet to come to fruition, but with the Government Bill gathering momentum, could we see a carrot offered to landlords who offer at least three year tenancies?
Of course all of the above is speculation and we will wait to see what changes actually would take place , affecting the private rental sector, one of the most applicable topics of the moment.
