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What could be in the Budget for landlords?

3-minute read

Mollie Millman

23 February 2021

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The Chancellor is expected to announce measures affecting landlords in his Budget on 3 March.

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Rishi Sunak is under pressure to plug the financial hole created by supporting the economy during the coronavirus pandemic. However, at the same time, he needs to make sure the economy keeps moving and that the government continues to support those in need.

Marissa Thomas, of accountants PwC, said: “At some point in the near future, the Chancellor will have to turn to the unenviable task of nursing the economy into recovery while repairing the country’s public finances. That will probably mean some tax changes.”

However, she added that wide-ranging measures are ‘unlikely’ and that the Chancellor will probably use the Budget to set out a roadmap to recovery, showing what the landscape for future revenue raising measures will look like.

In the meantime, Ms Thomas added that the immediate focus is likely to remain on the ongoing need to protect jobs and livelihoods. Here’s what that could mean for the property market and landlords.

A stamp duty extension

There’s been widespread speculation in recent weeks that the stamp duty holiday will be extended by six weeks, from 31 March to the middle of May.

More recently, The Times has reported that the Chancellor will extend the holiday until June, and could announce extensions to other coronavirus support schemes (like furlough).

A stamp duty holiday extension would allow any property sales agreed in recent weeks to complete, with people saving up to £15,000 on their stamp duty bill. Otherwise, delays in the transaction pipeline could see these sales fall through.

The stamp duty holiday applies to the first £500,000 of a home’s purchase price. It applies to all properties, although landlords still have to pay the three per cent stamp duty surcharge.

Landlords would continue to benefit in this way if the stamp duty holiday is extended.

A change to capital gains tax could hit landlords

Another tax that the Chancellor is looking at is capital gains tax, which is a tax on the profit of a sold item that’s risen in value.

This could affect landlords as the tax is levied on the gains made from the sale of second homes and buy-to-let properties. It’s not currently levied on main residences.

Last year, the government looked at what changes could be made to the tax, including whether capital gains tax could be increased to bring it in line with income tax rates.

Capital gains tax has traditionally been taxed at lower levels than income tax. On the sale of second homes, the rates are currently 18 per cent for basic rate taxpayers and 28 per cent for higher rate taxpayers.

The move, if implemented, would see the tax rate on capital gains made on buy-to-let properties rise to 20 per cent for basic rate taxpayers. Higher rate taxpayers would see the rate on residential property that's not their main home rise to 40 per cent.

The move could hit landlords hard and so it may be too early for Mr Sunak to consider such a move. The Budget on 3 March will reveal whether this is the case.

The Times has also suggested that corporation tax will gradually increase over the course of this government, "rising to 23p in the pound by the time of the next general election".

As James Tucker, of mortgage tech provider Twenty7Tec, points out: “My sense is that Rishi [Sunak] is going to receive criticism no matter what he decides.”

What are you hoping to see in the Budget? Let us know in the comments below.

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