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Some rare good news for landlords

The trouble with the sheer volume of Budget coverage in the press is that it’s easy to overlook some of the less dramatic announcements. Here are two property-related changes you might have missed, along with a rare good-news story for landlords.

Help to Buy has its wings clipped

Last week’s Budget confirmed that the Help to Buy equity-loan scheme, which offers taxpayer-backed loans worth 20% of the purchase price of a new-build house, will be extended until 2023. But from April 2021 it will only be available to first-time buyers. Buyers will also only be able to purchase properties worth up to 1.5 times the “current forecasted average first-time buyer price” for the region, with a maximum of £600,000 for London. This will mean buyers in the north east will only be able to buy houses worth a maximum of £186,100, while those in the north west will be able to spend up to £224,400.

The current iteration of the equity-loan scheme has been widely criticised for pushing up the price of new builds, as it widened the pool of people who could suddenly afford new-build properties and fuelled demand. So it follows that a price cap might push prices down somewhat by tempering demand, perhaps to the point where the original Help to Buy borrowers could have afforded to buy without the scheme. Unfortunately, these people are already (or will soon be) stuck paying the interest on their government loans (which are interest-free for the first five years).

Crackdown on energy efficiency

Another measure from last week’s Budget that escaped many people’s attention will see more landlords required to improve the energy efficiency of their properties. Since April, landlords who own properties with an energy-performance certificate rating of F or G have had to upgrade them to at least band E or face being barred from arranging new tenancies. Yet landlords only had to carry out these improvements where financial support was available to cover the costs.

From 2019, however – a date is yet to be specified – landlords will have to pay for improvements that don’t exceed £3,500. The cost of bringing a house to the minimum energy-efficiency level is typically around £1,200. This new rule will affect 290,000 properties, estimates the government. Most landlords should not be affected by this rule change, assuming their properties already comply.

Buy-to-let borrowers in demand

Mortgage lenders are offering attractive deals to buy-to-let landlords, in a bid to win the business of those who haven’t left the increasingly unprofitable sector. The past few years haven’t been kind to landlords, as the government has brought in various taxation and regulatory changes in an attempt to slow the expansion of the buy-to-let market. In the first half of this year, landlords spent £12.1bn on new buy-to-let purchases, which is 30% lower than the amount spent in the first half of 2015.

So buy-to-let lenders are competing for fewer customers, and adjusting their offers accordingly. Last month the average five-year fixed buy-to-let rate had fallen to 3.4%, the lowest level since data provider Moneyfacts began collecting these figures in November 2011. Leeds Building Society currently offers an “easy start” mortgage, which gives landlords an initial three months of interest-free payments before reverting to a fixed rate of 2.72% for the rest of the five-year period. The Mortgage Works, part of Nationwide Building Society, offers a five-year fix at 1.99% (plus a £1,995 fee), while Sainsbury’s offers a two-year fix at 1.4%.

Source: Money Week

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Autumn Budget 2018: Industry pleased the Chancellor left buy-to-let alone

Some buy-to-let professionals were pleased Chancellor Philip Hammond didn’t introduce any further buy-to-let taxation changes in his Autumn Budget.

Andrew Turner, chief executive at specialist buy to let broker Commercial Trust, felt the move to raise income tax thresholds could be good news for some buy-to-let borrowers.

He said: “Certainly there had been speculation beforehand that the Chancellor might increase stamp duty on second homes, but in the event, these proved unfounded.

“There was very little mention of landlords at all and perhaps the most significant aspect of this Budget, was the raising of personal income tax allowances to £12,500 for basic rate and £50,000 for higher rate, from April 2019.

“This could represent good news for some landlords, who are borderline higher rate tax payers at the present threshold of £46,351. If these landlords suddenly find themselves in the lower tax bracket from next April, they might benefit from more generous borrowing calculations on some buy-to-let products.

“This is because some lenders apply less strenuous rates in their income calculation ratio (ICR) assessments for non-tax payers and basic rate tax payers.

“This could result in some formerly higher rate tax payers being able to borrow more money on selected buy-to-let mortgage products, if they do drop out of the higher rate tax bracket into the basic rate.”

Toni Smith, chief operating officer, PRIMIS and Personal Touch Financial Services (PTFS), said: “It will undoubtedly be a relief for many landlords that the Chancellor has moved his focus away from the buy-to-let market in this Budget – a sector which is still getting its head around recent regulatory updates.

“This decision will hopefully afford landlords the time they need to take stock of their positions, and work to consolidate, or potentially grow, their portfolios.”

Similarly Peter Izard, business development manager at Investec, agreed and also welcomed Hammond cutting stamp duty for shared ownership properties valued at up to £500,000.

He said:  “It was pleasing to see the Chancellor did not make any major changes to taxation in the buy-to-let sector or in stamp duty apart from the positive changes in shared ownership stamp duty.

“Investec considers the housing market requires a period of certainty and the lack of changes will be welcomed.

“The Chancellor announcements in the budget on the £500m increase to the housing infrastructure fund to support SME housebuilders are welcomed by Investec.

“The UK continues to suffer from a shortage of new housing to meet supply demands.”

Source: Mortgage Introducer

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How the Autumn Budget will affect SMEs

The Chancellor’s Budget announced earlier this week by Philip Hammond has promised an ‘end to austerity’ for Britain. With numerous policies to help first-time buyers, lower incomes and housing, we look at how the new Budget will impact the SME marketing in the UK.

A significant change will be the Chancellor’s attempt to help fledging high-street businesses, who have certainly felt the pinch over the last year, with noticeable casualties such as House of Fraser, BHS, Byron Burger and Jamie’s Italian.

In a move to better the current situation for high street businesses, Hammond has pledged to cut business rates by a third for all retailers with a rateable value of £51,000 or less for the next two years. This will help retailers save up to £8,000 per year and that includes high street shops, pubs, restaurants, cafes and other small business owners that are losing ground online.

A further £675m has been assigned as a Future High Streets Fund, to aid the transformation of the UK’s high streets, to improve footfall and regenerate areas in need of redevelopment.

For entrepreneurs, the start-up loan scheme originally founded by Rt Hon David Cameron will be backing a further 10,000 new businesses – this includes seed funding, start-up capital, merchant loans and business finance. A further £200m has been put aside by the British Business Bank to replace funding which they are likely to lose from the EU following the Brexit deadline in March 2019.

For SMEs that take on apprentices, the training bill will be reduced from 10% to 5%, and the government will pay the remaining 95%. Those apprentices aged 16 to 18 and working in companies of less than 50 will continue to have their training full funded.

Losing out from the Budget will be the powerhouse tech companies who started abroad but operate in the UK and use schemes to avoid paying tax. Pointing out the likes of Google, Facebook and Amazon, the tax will be imposed on those firms with a global revenue of £500 a year and the increase in tax will put £400 million back in the UK government, when it comes into place in April 2020.

Elsewhere, a scheme has been planned to offer interest free loans those struggling with debt caused by high cost credit – relating specifically to unauthorised overdrafts, rent to buy and payday products. This will be based on a consumer level and not impact businesses or sole traders using guarantor, personal or bridging loan products.

UK roads and infrastructure are expected to get a huge boost at just under £30bn in investment and first time buyers in shared ownership schemes will have their stamp duty scrapped – giving them a saving of £10,000.

Source: FinSMEs

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Nothing For The Buy To Let Landlord In Autumn Budget

In an Autumn Budget much anticipated by the property industry, the Chancellor of the Exchequer, Philip Hammond has given very little in the way of help.

The hoped-for announcements of waiving Capital Gains Tax for landlords who sell to first time buyer tenants, and also tax breaks and incentives for landlords who offer longer-term tenancies and various cuts to stamp duty have failed to materialise in the Autumn Budget.

Instead, token gestures towards fixing the UK property market seemed to be the order of the day.

£5.5 billion for the Housing Infrastructure Fund – in a move aimed at supporting the building of 650,000 new homes.

£1 billion to support SME housebuilders.

The abolition of Stamp Duty for all first-time buyers of shared ownership properties valued up to £500,000 – which will be backdated to the date of the last Budget.

The failure to introduce tax breaks for landlords prepared to offer longer tenancies seems a particularly missed opportunity, as industry research has shown that mandatory longer tenancies may cause some landlords to exit the sector, and that not all tenants are looking for long-term agreements.

The introduction of tax breaks for longer tenancies in the Autumn Budget would certainly have lessened the blow to many landlords of announced plans to introduce mandatory three-year tenancies.

Founder and CEO of Emoov, Russell Quirk, commented: ‘As expected, the Government has chosen to turn its back on addressing the current housing crisis and has instead deployed yet more cheap magic tricks and white rabbits in an attempt to divert our attention.

Retrospective stamp duty relief on shared ownership properties up to £500,000 is a very small give away and £500 million to help with an additional 650,000 homes will equate to nothing but rhetoric.

To say that the big developers are not land banking shows a completely naive disconnect from reality. Today absence of any meaningful housing announcements is disappointing, to say the least especially when housing is the second hottest political topic in this day and age.

We’ve been led to believe that this Government is serious about fixing Britain’s broken housing market, but so far their attempts equate to little more than plugging holes with PVC and sticky tape, rather than delivering a solution based on a watertight blueprint.’

Other property experts were equally disappointed by the Autumn Budget.

Rory O’Neill, Head of Residential, Carter Jonas, said: ‘The Chancellor has withheld much-needed support from landlords and tenants who are in a continuous state of flux over changes in fees and tax legislation. We would urge the Government to explore the correlation between financially squeezed landlords, many of whom struggle to invest in their properties, and tenants struggling to find homes that are fit for purpose.

‘In throttling landlords with the removal of taxation relief, many are vacating the market altogether, which is creating a shortage of good quality lettings properties in an affordable price bracket. Not ideal when so many tenants are already crippled by rents and unable to save for a deposit of their own.’

Source: Residential Landlord