Yesterday we saw the first all-Conservative Budget since 1997, with the Chancellor stating that with the new measures in place, debt will continue to fall year on year, with a surplus being achieved by 2019/20.
Changes to landlord tax relief
The announcements regarding lower mortgage tax relief for landlords is a complex issue but in reality is likely to only materially affect the most highly leveraged landlords. Historically, buy-to-let returns in London have been driven by capital appreciation more than income yields making buy-to-let still an attractive investment proposition for many.
It is also worth noting that the tax relief cap of 20% which is intended to roll out over a four-year period from April 2017 will only affect a small percentage of landlords, whilst landlord running their buy-to-let properties through a company should not be affected at all. There have also been suggestions of rent increases in the future, however, this will be as much to do with the ongoing supply and demand as anything else.
There have been further announcements that from April 2016 landlords will see further limits on tax deductions with the automatic 10% wear-and-tear costs no longer being permitted. The exact result of this is hard to measure until clearer guidelines have been released.
For the sales market, should some landlords choose to release their buy-to-lets onto the market this will go some way towards easing the shortage of properties for sale across the country. This should also be of benefit to first time buyers and will create more choice.
If you would like to talk things through with one of our experts in the coming weeks we would be very happy to discuss your best options going forward, for your own personal circumstances.
Inheritance tax adjustments
An additional £175,000 family home allowance will be added to the existing £325,000 tax free allowance rolling out over a four year period from April 2017. This will allow up to £500,000 to be passed on without paying any Inheritance tax at all, passing from one partner to the other and totalling £1M per couple. This will be a relief to those that have seen their properties increase in value in over the years due to the constant rise in property prices.
