The Chancellor surprised everyone by announcing that the Budget would take place on Monday, 29 October, much earlier than expected since Brexit negotiations conclude at the end of November.
While the Conservative Party conference earlier this month revealed only a handful of major policy announcements, the Budget is likely to look to strengthen the UK’s economic position post-Brexit.
In the Budget recommendations we submitted to the Treasury we called for the immediate review of the removal of finance cost relief for landlords, Capital Gains Tax (CGT) reduction measures, the reintroduction of the Landlords’ Energy Saving Allowance (LESA), and the abolition of the Stamp Duty Land Tax (SDLT) levy on additional property. You can read our full submission here.
A tax break?
The media has been feverishly speculating about the potential for a capital gains tax break. The Times reported that senior Conservatives were keen on the proposal by the centre-right think tank Onward for landlords to receive 100 per cent CGT relief if the property is sold to tenants who have lived there for three years or more. Onward proposes that the gain from the tax relief is split evenly between the landlord and the tenant, supporting tenants to provide a mortgage deposit while also benefiting landlords. The think tank says the Treasury can fund this through changes to other tax reliefs for buy-to-let investors, such as the Private Residence Relief period and Lettings Relief.
With the recent consultation on barriers to longer tenancies, and the government’s focus on increasing home ownership, it is highly likely that some incentives will be announced to encourage landlords to offer longer tenancies as well as release properties to first-time buyers.
We have called for similar measures to encourage the sale of properties to sitting tenants for some time and will be watching closely for the detail of the initiative.
Removal of limits on council borrowing
The major housing announcement that came out of the Conservative Party conference was the scrapping of the current cap on how much councils can borrow against their existing housing stock. The government estimates this will enable councils to build up to 10,000 extra homes a year. Councils would be better able to take on smaller sites that are unattractive to private developers.
Chancellor Philip Hammond will use the Budget to outline a plan for this policy to be introduced. The government confirmed that the cap will be lifted “as soon as possible”.
We can expect some announcements to promote energy efficiency as the government seeks to meet its targets. The government’s Clean Growth Strategy aims to reach a minimum Energy Performance Certificate rating of C for as many residential properties as is practical, cost-effective and affordable by 2035 and for privately rented properties specifically by 2030.
Properties in the private rented sector in England and Wales are currently required to meet a minimum energy-efficiency level of E for new tenancies and will be required to reach that standard for all tenancies by 2020.
We are still awaiting the government’s response to their consultation earlier this year on introducing a cost cap for landlords who implement energy-efficiency measures.
During the summer there was speculation about further changes to Stamp Duty, with additional increases for buy-to-let properties. There has been no more speculation on changes for UK buyers – but it remains a possibility to fund other policy commitments.
The government has already announced an additional levy on foreign buyers of properties in the UK with revenues going towards addressing homelessness. It will be consulting on the level of the levy in due course.
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