Autumn Budget impact on Landlords
The autumn budget further underlines the government’s mission to reduce the number of properties in the private rented sector, and increase home ownership. The short-term measure of scrapping stamp duty for first time buyers will do little to stimulate activity as the real issue is the difficulty of saving a deposit for those who are paying such a high proportion of income in rent. It is clear that any notional saving in cost to first time buyers will simply result in price increases in the relevant value band as the supply/demand matrix re-balances.
Changes in indexation
The measure that will have more impact is the changes in indexation; from January 2018 this will be frozen, and many commentators consider this a precursor to it being scrapped altogether.
Genevieve Moore, of accountants Blick Rothenberg, said: “The proposed freezing of indexation allowance for companies is not unexpected and will have most impact on companies that own properties which they have owned for many years.
Although this is a proposal for freezing indexation allowance, businesses should be prepared for an eventual abolition of the relief in the future and plan accordingly.
This year the reduction of mortgage interest relief will start to bite, landlords can now claim relief on only 75% of interest payable. Next year this will drop to 50% and in 2019 it will be 25%. It is unlikely that the government will need to introduce the zero% in 2020 as by then all the vulnerable landlords (heavily geared with high loans to value) will have had to get out of the game.
The announcement about indexation changes will impact those landlords who have transferred ownership of their portfolios into company structures.
At College and County, we still anticipate that there will be stamp duty concessions for institutions seeking to acquire portfolios from private landlords. I predict that there will be announcements along these lines within the next 12 months.