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Today, Chancellor Philip Hammond delivered the Budget for, what is expected to be, the final time before Britain leaves the European Union.Here are the highlights pertinent to landlords and the housing/property sector:"It's a Budget for hard working families"."A Budget for the strivers, the grafters, and the carers - the backbone of our society"."This Budget is for these people. The Budget paves the way for a brighter future"."We have reached a defining chapter in the long journey back from austerity"."The era of austerity is finally coming to an end"."Our economy continues to confound those who talk it down"."The UK has enjoyed 8 straight years of economic growth. Wages growing at their fastest pace in over a decade. An economy back on its feet again. An economy working for everyone!"."We are at a pivotal moment in our EU negotiations and the stakes could not be higher"."We will continue to plan for all eventualities."Economic ForecastThe OBR expect growth to be resilient across the forecast period……improving next year from the 1.3% forecast at the Spring Statement……to 1.6%...…then 1.4% in 2020 and 2021; 1.5% in 2022; and 1.6% in 2023.” #Budget2018Deficit is due to fall from 10% under Labour to less than 1.4% next year, falling to 0.8% in 2023/24.
He says borrowing will fall to its lowest structural level for 20 years.The Government is implementing a spending review and will set out a 5 year path for departmental spending.A big public spending commitment will be in the NHS.Mental illness will receive special new services and include a new mental health crisis service.Local Government have made a significant contribution to solving the deficit.Grants will be made to local authorities to help with older people and children.An additional £1bn for the defence budget.Policing is under pressure. The Home Secretary will review police spending.86% of schools are rated "good" or "outstanding". £400million in year bonus to help schools to buy items.£420million to be made available to local authorities to tackle potholes!!!£1.6billion to support the Government's industrial strategy.Increased investment in roads, railways, infrastructure, and digital technology."The real engine of growth is enterprise"."We will always back enterprise and the market economy that underpins it".Today I announce a package of investment to stimulate business!"The world needs to know that Britain is open for business."Additional £200million of funding for British Business Bank.From April 2020, lettings relief will be restricted to those people sharing their home with lodgers.Hammond says he will extend the rules on IR35 to the private sector, but delay the changes until April 2020, and only apply them to large and medium-sized businesses.A Digital Services tax to be introduced in April 2020 and expected to raise £400million per annum."...It will be carefully designed to ensure it is established tech giants – rather than our tech start-ups - that shoulder the burden of this new tax.”Tax avoidance and evasion measures are being introduced including making HMRC being a "preferred creditor" in insolvencies.The High Street must be protected - a new fund issued to protect High Streets and turn unused commercial property into residential property, therefore assisting with the housing crisis.Business rates will be cut by one third for firms with a rateable value of less than £50,000."We need to fix our housing market"."The number of first time buyers is at an 11 year high".The Housing Infrastructure Fund will receive an additional £500million.This will support the building of an additional 650,000 new homes.Hammond says he is publishing the Oliver Letwin report on housing developers.
It concludes developers are not engaged in land banking, he says.South Tees gets backing as a new industrial area.There will be 19K additional homes in London due to improvements on the Docklands Light Railway.Chancellor announces £950m for the Scottish Government…£150m for a Tay Cities Deal.£12million will be invested in cutting edge fishing technology to assist the fishing industry as we leave the EU.£10million pounds will be provided to deal with abandoned waste in a bid to improve the environment."We must become a world leader in tackling the scourge of plastics".New tax on plastics that do not contain at least 30% re-cycled plastics.A series of measures to help families across England with cost of living:> Freeze fuel duties for the ninth year in succession.Universal CreditThe Chancellor recognises concerns over the implementation of UC. £1billion over 5 years will be made available to aid the transition from LHA to UC.Concerns over rates and allowances. Work allowances in UC being increased by £1,000, at a cost of £1.7bn. (Work allowances are what people can earn before they start to lose benefit.)"Universal Credit is here to stay and we will be putting in the funding to see it through"."We want working people to keep more of the money they earn".Hammond says he raised the basic rate tax threshold to £11,850 in April. And the higher rate went up to £46,350.
He says people have urged him to abandon the Tory manifesto commitment, and freeze rates where they are.
But he did not come into politics to put taxes up, he says.
He says he will meet the Tory manifesto commitments in April 2020. After that they will be indexed, he says.
The Chancellor concludes the 2018 Budget with:"Under this Conservative government is coming to and end, but discipline will remain".
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
Great summary! I think the biggest gives are increasing the personal allowance in 2019 and changes to universal credit - although not sure this will directly help landlords current predicaments. Other opportunities for landlords/investors are likely to be based on the infrastructure changes/investment in areas such as Milton Keynes/Cambridge/Oxford corridor.
Obviously main loss - so far - is the lettings relief and although that's a blow, it's probably better than some had feared.
Now I think there is a very large amount of detail to go through to double check if anything else is being introduced but not highlighted!
Reaction:Despite the Chancellor's move to freeze the VAT threshold and bring forward the tax-free personal allowance rise, his decision to roll out controversial off-payroll (IR35) changes to the private sector in April 2020 will have a catastrophic impact on one of the UK’s most productive and dynamic sectors, the Association of Independent Professionals and the Self-Employed (IPSE) said today.
IPSE’s Chief Executive Officer, Chris Bryce, commented: “The Chancellor has today forced the self-employed into a holding pattern of despair, as they await the introduction of controversial tax changes which could force them out of business from April 2020.
“The Chancellor’s smash-and-grab approach to taxing the smallest businesses is short-termism on steroids.
“It is a short-term tax grab that will do lasting damage to the economy by taxing out of existence the smallest and most agile businesses.
“These are the very businesses the government and large corporations will need to call upon to provide the specialist skills to navigate our way through Brexit.
“This fresh raid on the self-employed comes only a month after the government backtracked on its pledge to abolish Class 2 NICs, costing freelancers an average of £150 per year.
“The Chancellor’s budget record is stuck on repeat: go for the self-employed, go for the self-employed.
“The Chancellor says this is about tackling non-compliance, but the government’s idea of what ‘non-compliance’ looks like has been overturned by the courts in 75 per cent of cases in the last decade.
“The off-payroll rules are so complex and crude that genuinely self-employed people will be swept up by the government’s smash-and-grab mentality and in many cases taxed out of operation.
“This will have a chilling effect on entrepreneurialism in the UK: if you’re thinking about striking out on your own, as a white van man or a one-woman band, you’ll always be looking over your shoulder, wondering when the government will be coming after you.
“These measures are also profoundly anti-business and anti-competitive. Large, multinational companies who engage contractors will now have the power to unilaterally alter the tax affairs of the smallest businesses – the self-employed.
“The rules also allow big businesses to push their National Insurance obligations onto the self-employed, who end up being taxed like employees without any employment rights.
“Once these smallest businesses have been forced out, the likes of the Big Four service companies – who don’t have to worry about IR35 – will swoop in and pick up all the contracts.
“The self-employed contribute a staggering £271 billion to the UK economy each year, and give the country one of its greatest competitive advantages – flexibility.
“The government’s smash-and-grab mentality will therefore punish the overwhelming majority of genuinely self-employed people, heap a massive administrative burden onto businesses at a time of Brexit uncertainty, and also undermine one of the UK’s most dynamic and productive sectors.
“The fight against this crude and unworkable policy isn’t over. For the sake of the UK economy, IPSE will continue to stand up for fairness and do everything it can to prevent the government from taking a wrecking ball to the UK’s flexible workforce.”
Personal allowance increased:
“It is very pleasing that the government has followed through on a manifesto pledge to increase the personal allowance. It’s a measure that will particularly help the lowest paid self-employed. According to IPSE research between nine and 13 per cent of the self-employed are at risk of being vulnerable – with low pay being one of the defining characteristics. Therefore, increasing the current tax-free threshold from £11,850 to £12,500 as soon as April next year is a major shot in the arm for this group.”
On freezing the VAT threshold:
“While the news will be welcomed by many millions of our smallest businesses – the self-employed – IPSE wants to see the government actually go a step further and increase the VAT threshold in line with RPI. This would resume a historic trend which saw the threshold pegged to RPI from 1980 until it was frozen in 2017. Doing so would give businesses both certainty and the space to grow and thrive – particularly import as the UK’s impending exit from the EU approaches".Extension of New Enterprise Allowance:
“The NEA has the potential to be a great springboard into the world of work and has already helped over one hundred thousand people onto the path of viable work, from the white van man to the one-woman band.
“IPSE is glad the NEA has been extended. Encouraging people into self-employment and to run their own businesses is an overwhelmingly positive thing for the economy, as it lowers unemployment and boosts productivity and Government coffers in the long term.”
Could've been a lot worse.
Local smaller builders to be helped and conversion of central properties to residential may help rebuild town and city centres. Planners will be crucial.
The devil if any will be in the detail. As ever.
On the surface it’s ok
good that 50k thresholds for 40% has risin
also I was surprised that pension contributions were not cut
so I say thank you Phil
Learn Change and Adapt ?????
All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.
Thanks Vanessa, very useful summary, but do we know what on earth this means?
"From April 2020, lettings relief will be restricted to those people sharing their home with lodgers"
All the best
From April 2020 the government will limit lettings relief to properties where the owner is in shared occupancy with the tenant - in other words, not where a whole dwelling is let when the landlord is not present.
Landlords can currently claim upto £40K against their CGT bill if they sell a property they have previously lived in known as "lettings relief" here is a link https://www.gov.uk/tax-sell-home/let-out-part-of-home
You will no longer be able to claim this relief unless you live in the property with lodgers
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Suspect that the £50,000 level for 40 per cent won’t help Scotland which will stay at around £43,000. Which numpty gave Scotland control over its own tax raising?
Reaction:Neil Cobbold, chief operating officer of PayProp UK, said:"It’s surprising that the government did not announce a more stringent clamp down on short-term lets. This sector provides a great boost to the economy, but has grown rapidly in recent years and greatly affects the fortunes of the lettings sector, so it is arguably the right time for initial regulation.
There has to be an equal tax footing for conventional landlords and those looking to let their homes on a short-term basis, and the proposal for limited tax relief on properties where the owner is in shared occupancy with the tenant marks the very first step towards achieving that.
Over the next decade, it's likely that the short-term lets market will continue to expand, so it will be interesting to see if the government takes a similar regulatory approach as it has done with standard lets in the private rented sector (PRS)".