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Buy-to-Let was not explicitly mentioned in the 2021 Autumn Budget, but it does contain some important information for landlords. In this article, our team at Cedar House highlights the key announcements for your attention and what they might mean for your property portfolio. We hope you find this content useful. If you want to discuss your own financial plan with us, please contact our team for more information or to access personalised financial advice:
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Capital gains tax deadline
There was widespread anticipation leading up to the Autumn Budget that the Chancellor would use it as an opportunity to raise capital gains tax (CGT). This would, of course, have impacted any landlords looking to sell property for a profit. However, this failed to materialise. In 2021-22, therefore, Basic Rate taxpayers pay a rate depending on factors such as the size of the gain, whilst those on the Higher and Additional rates continue to pay 28%. The Budget did, however, state that landlords no longer have to report and pay CGT within 30 days of selling a residential property – rather, the deadline has been extended to 60 days from 27th October 2021.
Although the possibility of an imminent CGT rise appears to have subsided, it could still rise in the future. In 2020, Chancellor Rishi Sunak requested the Office for Tax Simplification (OTS) to report on CGT, which went on to recommend closing a series of exemptions and doubling rates to raise £14bn. Given the current pressures on the UK public finances (especially after repeated COVID-19 lockdowns), a CGT rise in the coming years could be on the horizon. After all, there is precedent under previous Conservative governments (e.g. in 1988, Chancellor Nigel Lawson equalised income tax and capital gains tax).
£65m Covid-19 debt fund
It was not mentioned in the Autumn Budget, but the Department for Levelling Up, Housing and Communities has announced on 23rd October 2021 that a £65m fund has been launched to assist low-income tenants in rent arrears due to COVID-19. Now that the eviction ban and the furlough scheme are now over, this money could offer private renters some vital assistance. It may also be welcome news for landlords who do not want to evict their tenants, but need them to pay up. There is concern, however, that £65m may not be enough and that the figure should be closer to 5x this amount according to Chris Norris, Policy Director for the National Residential Landlords Association. Also, it is not clear when this funding will become available. Landlords should, therefore, be careful not to hold their breath for an imminent resolution to this issue.
£1.8bn will support the building of 160,000 new homes on brownfield sites in England, and £5bn extra has been pledged to remove unsafe cladding from the highest-risk buildings. The latter will be funded primarily by a new 4% tax on property developers who generate profits over £25m. In total, 1m new houses will be built – with 180,000 to be classed as “affordable homes”.
However, it is important to note that the Budget did not elaborate on a replacement for the Green Homes Grant. This was originally announced on 30th September 2020 as a scheme to help landlords and homeowners pay for energy efficient renovations to their property. Yet it only reached about 7% of the 600,000 intended households, offering up to £10,000 to make homes more energy efficient or to replace old boilers. Unfortunately, it proved too difficult for people to find installers who were able (or willing) to do the work. Given the current publicity around COP 22 and the general push in politics towards green issues, a new version of this scheme may be available in the coming years. For now, sadly, landlords will need to largely foot the bill themselves for energy efficient improvements.
A review of BTL and the Budget
For landlords, it is perhaps fair to say that the Budget was significant for what it did not say, rather than for what it said. In particular, there were no changes regarding the Stamp Duty Land Tax following the end of the successful holiday scheme. The announcements about investment in new homes were largely welcomed, but are unlikely to address the UK’s demand for housing. This could be good news for Buy-to-Let investors as supply constraints are likely to act as an upward pressure force on UK house prices. This, of course, could mean opportunities for higher property sale profits and rental yields in the coming years. However, this is not a guarantee and plenty of forces could pull house prices in the opposite direction – e.g. if interest rates rise. It is also worth noting that the Government has said that 65% of the Affordable Homes Programme funding will be for homes outside London, which means that the impact of the funding on house prices may not be equal across the UK.
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