On the 8th July George Osborne unveiled his first Budget under a Conservative majority, describing it as a Budget “for working people”, “putting security first.” So at Ainsworth Lord Estates we thought we’d help you out by summarising the main points that could seriously affect you and your tenants in the future:
- Mortgage Interest Relief
Buy to let mortgages will only be able to offset interest against costs at the basic rate of tax; 20% instead of the higher rate of 45% currently on offer to landlords. This will be phased in over a 4 year period starting from April 2017.
According to the Chancellor this move will ‘level the playing field for home-buyers and investors’ – but many in the industry are worried that this could obliterate the PRS field completely. Some experts believe that this move will only force UK landlords to increase their rents to compensate for the tax-cut blow, which could be really bad news for tenants’ finances. Could this move starve the market of much needed homes for rent?…
- Wear and Tear Allowance Scrapped
The current system, allowing landlords who let furnished accommodation to claim 10% of their rent back on wear and tear, will be scrapped from April 2016. This means that landlords will only be able to deduct costs that they actually incur, following on from the tax concession of unfurnished property being withdrawn back in 2013.
- Rent-a-room relief
To encourage more people to rent out their spare bedrooms, make use of the countries existing stock and help ease the housing crisis (particularly in London), the current tax relief of £4,250 will be increased to £7,500.
The Chancellor said: “The rent-a-room relief is designed to help homeowners who rent out a room in their home. It’s a good scheme, particularly in a world where more and more people are renting out rooms online, but the relief has been frozen at £4,250 for 18 years. Next year, we will raise it to £7,500.”
- Clamp Down on Tax Avoidance
At the moment, people who live in the UK are able to claim ‘non-dom’ status on their income. This means they don’t have to pay the rate of UK tax earned on money that they earn outside of Britain, but from April 2017 this will no longer apply to anyone who has lived here for 15 of the past 20 years. This could seriously affect ‘non-dom’ landlords and tenants in London in particular.
- Welfare Cuts
Cuts to welfare provisions for 18-21 year olds, families and the disabled will affect many tenants living in the PRS right across the country, including:
- No automatic housing benefit for 18 to 21 year olds,
- A freeze on working age benefits for four years,
- From 2017 child tax credits to be restricted to just two children,
- Benefits to be cut and capped from £26,00 to £20,000 (£23,000 in London)
- Cuts to employment and support allowance payments for new claimants deemed capable of “work-related activity”.
Do you have any more questions that you need answered about the summer Budget 2015? Or are you now thinking of leaving the buy to let market and need to sell? Whatever situation you may be in, please don’t hesitate to get in touch with us: 01254 760660 or email: Darwen@AinsworthLordEstates.com today..