If you’re a landlord, you’ll be taking more than a passing interest in the underlying state of the economy. The Autumn Statement by the Chancellor of the Exchequer might be just the time to find out what’s going on – and to hear what plans are in the pipeline that could affect your buy to let business.
Let’s take a closer look at the Chancellor’s latest statement about some of the government’s intentions.
Taxation
Rarely a subject to gain a lot of support, this year’s Autumn Statement contained snippets of good news about taxation for landlords.
Landlords with larger portfolios who are self-employed and earn profits of more than £12,570 will no longer be liable for Class 2 National Insurance Contributions with effect from the new tax year in April. They will still be eligible for contributory benefits though, including the State Pension.
Noting this gain for landlords, the National Residential Landlords Association (NRLA) also recorded its dissatisfaction with failures by the government on other taxation fronts:
- there was no mention of the NRLA’s earlier arguments in favour of reintroducing mortgage interest tax relief;
- the reduction of the tax-free allowance on Capital Gains Tax (£12,300 to £6,000 next year then £3,000 from April 2024) – a move likely to encourage still more landlords to sell up and quit the private rented sector altogether, argued Landlord Zone;
- no change to the extra 3% premium landlords pay in Stamp Duty Land Tax – which could discourage landlords from investing in further property to let; and
- no additional tax incentives for investment in private sector rental property.
Planning
One of the more controversial promises from the Chancellor would allow much greater freedom to create self-contained flats within a single dwelling.
Owners of single residences would be given the “permitted development right” to create two self-contained flats – provided there was no alteration to the façade of the building – without the need for formal planning permission.
Supporters of the move argue that the planning freedom will allow the creation of more affordable homes, but opponents are worried about changes to the character of a neighbourhood and the impact on available parking spaces.
Local Housing Allowance
Starting in the new tax year, the Local Housing Allowance will once again be aligned with the 30% level of local market rents.
The Letting a Property website explains that the Local Housing Allowance is used to calculate the maximum sum those on Universal Credit or in receipt of Housing Benefits can claim towards their rent in the private sector. Naturally, that sum varies depending on the actual rent payable, the size of the property, and its location.
With the Allowance once again aligned to 30%, it is estimated that some 1.6 million households will receive an annual average of £800 in housing benefits.
At the same time, Universal Credit itself will go up by 6.7% and the National Living Wage (the minimum wage) will go up to £11.44 an hour (an increase of almost 10%) – both are clearly related to lower-income tenants’ ability to afford private sector rents.
Mortgage Guarantee Scheme
The scheme exists to help borrowers buy their first home even though they have smaller deposits. The scheme guarantees the availability of 95% loan-to-value mortgages, and it will now stay in operation until at least the end of June 2025.
Renters Reform Bill
In an Autumn Statement that offered little comfort to many landlords, uncertainty persists about the future and implementation of the much-vaunted Renters Reform Bill.
As long ago as the Conservation Party’s manifesto of 2019, the Bill has promised a thorough shake-up of the private rented sector. The Chancellor’s Autumn Statement did nothing to dispel that continued uncertainty.
Please note that this is based on our current understanding of legislation, which may be liable to change.
