The 2016 Budget- How will it affect Residential Landlords?
Looking at the budget positively- we have had lots of uncertainty cleared up around stamp duty and tax changes. Landlords now know where they stand and can plan accordingly.
Large scale investors will no doubt be disappointed that the extra 3% stamp duty applies to them no matter how many properties they have in their portfolio. This extra charge will now apply to any person buying a second home (no matter what it will be used for).
For some of our ‘accidental landlords’- this means home owners who are struggling to sell who can let their property to allow them to move will get stung with the extra charges.
However- it’s not all doom and gloom with regards to this- The chancellor has now allowed a time period of 36 months for owners to sell their old property to get a refund on these charges. They will have to pay the additional stamp duty after April but providing they sell before 36 months is up they can claim this back.
With regards to the tax relief changes- it has been confirmed that the amount landlords can claim on their mortgage and interest payments will be gradually reduced over 4 years. Our advice on this is to consider speaking to a tax advisor as this change only applies to individuals. Therefore, it may be a consideration to move your portfolio into a company structure.
Another area which has been cleared up, is the wear and tear allowance. This has now been abolished but instead the cost of replacing furniture and furnishings will be tax deductible. This creates an ideal opportunity for landlords to upgrade their properties which will help to increase rents and wow factor which should in turn also mean they attract better quality tenants who look after the properties. Landlords who have unfurnished properties will also be able to claim the cost of replacing carpets and white goods against tax. A good record of these works will need to be kept which means using a good agent to manage the properties becomes ever more prudent.
As you can see- from the initial negativity taken from the pre-budget announcement- we can take quite a few positive points. We envisage many more properties will be available on the market from April onwards and now is a very good time for landlords to negotiate a reduction which will cover the extra stamp duty paid. Property still remains an excellent asset to invest your money with a very good return.