Budget 2016 – key information for the housing market and property ownership

Take a quick look at my summary of what I believe to be the most important factors affecting first time buyers, homeowners and property investors in this year’s budget:

Help to Buy and Lifetime ISA

Something of particular note is that millions of consumers under 40 will be able to use a new Individual Savings Account (ISA) to buy a home or a pension. The Lifetime ISA will be launched in April 2017, and savers will receive a 25% bonus from the government. They will be able to put in up to £4,000 a year, with the annual bonus of up to £1,000 paid until the age of 50. The existing Help to Buy ISA scheme, which is slightly less generous than the new ISA, is due to end in November 2019 (where the government will boost your savings by 25% and the maximum government bonus you can receive is £3,000.)

Housing

The Budget document confirms the launch of the Starter Homes Land Fund. Around £1.2 billion of funding will be available for local authorities to convert brownfield land for housing, in order to deliver at least 30,000 start homes. It also confirms plans to move to a more streamlined, ‘red line’ planning system, which it claims will speed things up. On top of that, it will work with local authorities to release land with the capacity for at least 160,000 homes, while the Homes and Communities Agency will work with Network Rail to provide land around stations for housing, commercial development and regeneration.

Banks

The government is planning to sell off £16bn of UK Asset Resolution mortgages (this is the bad part of bailed out Northern Rock and Bradford & Bingley mortgages) to help repay the debt the failed bank owes to the Treasury when it bailed it out in 2008/ 2009. The government’s remaining Lloyds shares will also be sold this year. On a separate note, the bank levy will be raised from 0.156pc to 0.21pc, raising £900m a year.

Taxation of Buy to Let income

Unfortunately, there is no change to the previously announced measures to restrict the allowable deduction to the Basic Rate of tax for income derived from buy to let property, so these changes will go ahead (starting in April 2017). Limited companies are not affected and neither are commercial or mixed use properties.

Stamp Duty Land Tax

From April this year, anyone purchasing an additional property, whether as an investment (e.g. buy to let) or as a second home, will have to pay an extra 3% stamp duty. The budget also confirmed that initial proposals that would have meant 'significant investors' - both companies and individuals - buying more than 15 properties were exempt, have been rejected.

Band

Existing residential  SDLT rates

Additional rates for landlords

£0 - £125k

0%

3%

£125,001 - £250k

2%

5%

£250,001 - £925k

5%

8%

£925,001 - £1.5m

10%

13%

£1.5m +

12%

15%

 

Stamp Duty Land Tax for commercial properties

From March next year, SDLT will be payable for each portion of the transaction that falls into each tax band. This means there will be a zero rate band on purchases up to £150,000; a 2 per cent rate on the next £100,000; and a 5 per cent top rate above £250,000

Capital Gains Tax

There is to be a reduction in the rate of Capital Gains Tax payable by individuals from 28% to 20% for higher rate tax payers and from 18% to 10% for Basic Rate tax payers. However sales of residential property (other than principle private residence – i.e. your home) are to be taxed at the old rates.

Corporation Tax

The rate of Corporation tax is currently 20% and this was due to reduce to 18% by April 2020. This is now to reduce to 17% by April 2020.

Overseas investment and development of UK property

A change is being made to ensure that property developers that base themselves offshore cannot avoid UK tax.

 

The above information does not constitute tax advice. For information on how the changes affect your personal circumstances, please talk to your accountant or a suitably qualified tax professional. Image courtesy of Stuart Miles at FreeDigitalPhotos.net