After a turbulent couple of years, landlords will be hoping for respite and perhaps positive news from the Autumn Budget, which will be delivered on Monday, October 29th.

Much of the UK’s financial landscape has been dominated by Brexit during 2018.

Initial optimism that a deal would be agreed between Britain and the European Union, by November, has given way to great uncertainty.

Undoubtedly Chancellor Philip Hammond will make his Budget Announcement with contingencies for all Brexit options and this may influence the extent to which he focuses on buy to let.

That said, the Government says it has pushed UK housing needs to the top of its priorities, so what changes might we see?

Andrew Turner, chief executive at specialist buy to let broker Commercial Trust Limited, takes a look at some possible scenarios.

CGT tax breaks?

Rumours are circulating, that 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.

According to Onward, the proposed CGT changes would cost Government £1.3 billion and the think-tank suggests this could be clawed back by ending other tax breaks that buy to let investors currently enjoy. 

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 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.

Commenting on Forsyth’s story, The Sun’s Political Editor, Tom Newton Dunn, wrote:

“A government source said: “Increasing the buy-to-let levy is something the Treasury are looking at doing in the Budget.

“It will be sold as a measure to ease the housing crisis but it’s more about raising money.””

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 with bated breath, to see what changes the Chancellor makes, affecting the private rental sector, one of the most pertinent topics of the moment.

It may be of course, that Brexit dominates the announcement and the housing issues are given less priority on this occasion.

Our friends at Commercial Trust will be on hand to report on any changes to the PRS and what this ultimately mean for landlords.

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Daniel Peacock

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