There was a sigh of relief amongst the lettings industry that yesterday’s Budget introduced no further letting market taxes. Just before the budget the BLT taxation has been a hot debate and tax specialists have said that this is the last chance for the Chancellor to reverse changes to tax relief for landlords which is set to be cut next month.
In 2015 former Chancellor George Osborne announced plans that mean landlords have to pay tax on turnover, rather than the difference between rental income and mortgage interest.
This budget is a disappointment for the letting market as the measures targeting buy-to-let landlords, is set to increases in the tax they pay on their rental properties from the beginning of April 2017.
Hammond said today: “We must ensure that our corporate tax regime does not encourage people across the economy to form companies simply to reduce tax liabilities, pushing the burden of financing our public services onto others. HMRC estimates that existing incorporation’s cost the public finances over £6 billion a year and the OBR forecast an additional annual cost to the Exchequer from those choosing to incorporate of £3.5 billion a year by 2021-22.”
Mr Ahmad the CEO of the British Landlords Association said today “the results of the budget will be reflected some 12 months later as evictions rise due to tenants falling in to arrears and landlords opting to exit the letting market. The government needs to attract more investors to the BLT to take up the slack in the housing crisis which both governments recently have failed to address. Instead the politicians are driving this situation the wrong way into a major crisis. If the letting markets like it or not the government needs to find money from somewhere our NHS is in crisis and the letting market is an obvious and a good target.
However, the government could be smarter in raising indirect taxes from the letting market but without hurting new investment into the letting market”.
Prior to this Budget it was made known to the media that the Treasury had looked at data surrounding the effect of stamp duty on both residential transaction levels and on revenue achieved by the measure. But Hammond ruled out action today, suggesting he would see if there was a need for further revision of SDLT later this year.
Landlords will have to wait and see as to the measures announced by Mr Hammond to minimise the advantages of self-employed over the employed in terms of National Insurance and tax payments. This does suggest that the fine print of the Budget to be released later tomorrow may have further tax burdens for landlords, especially those who set up companies to reduce the impact of the mortgage interest change.