Autumn Budget 2017 – What Letting Agents Need to Know

Budget 2 2017The Chancellor has today (22nd November) delivered the Autumn Budget. This briefing sets out the key policy announcements impacting on the private rented sector (PRS) and landlords’ businesses. Full details can be found here.

First and foremost, alcohol duties remained largely unchanged – although Mr Hammond did announce something akin to a “white-lightning’ tax for those with simpler tastes.

Likewise, fuel duty remains frozen.

However, company car driving letting agents will have little to celebrate as the Fuel Benefit Charge and the Van Benefit Charge will both increase by RPI from 6 April 2018.

Turning to housing and private rented sector related matters – this can be summarised as:

Private Rented Sector

  • Longer tenancies – The government will consult on the barriers to landlords offering longer, more secure tenancies to those tenants who want them.
  • Private rented sector access schemes – The government will provide £20 million of funding for schemes to support people at risk of homelessness to access and sustain tenancies in the private rented sector.
  • Empty homes premium – The government is keen to encourage owners of empty homes to bring their properties back into use. To help achieve this, local authorities will be able to increase the council tax premium from 50% to 100%.
  • Targeted Affordability Funding – To support Housing Benefit and Universal Credit claimants living in areas where private rents have been rising fastest, the government will increase some Local Housing Allowance rates by increasing Targeted Affordability Funding by £40 million in 2018‑19 and £85 million in 2019‑20. This will increase the housing benefit awards of approximately 140,000 claimants in 2018‑19, by an average of £280, in areas where affordability pressures are greatest.
  • Creditworthiness and rental payment data – The government will launch a £2 million competition, to support FinTech firms developing innovative solutions that help first‑time buyers ensure their history of meeting rental payments on time is recognised in their credit scores and mortgage applications.

Universal Credit Changes

  • From January 2018 those who need it, and who have an underlying entitlement to Universal Credit, will be able to access up to a month’s worth of Universal Credit within five days via an interest-free advance. The government will extend the period of recovery from six months to twelve months, making it easier for claimants to manage their finances.
  • New claimants in December will be able to receive an advance of 50% of their monthly entitlement at the beginning of their claim and a second advance to take it up to 100% in the New Year, before their first payment date.
  • From February 2018 the government will remove the seven-day waiting period so that entitlement to Universal Credit starts on the first day of application.
  • From April 2018 those already on Housing Benefit will continue to receive their award for the first two weeks of their Universal Credit claim.
  • The government will also make it easier for claimants to have the housing element of their award paid directly to their landlord. From December, new guidance will be issued to work coaches so they ask new claimants about their history with rental payments.

Taxation

  • Personal Taxation – The Budget announces that in 2018-19 the Personal Allowance and Higher Rate Threshold will increase further, to £11,850 and £46,350 respectively.
  • SDLT – From 22 November 2017, stamp duty land tax will be abolished for first-time purchases up to £300,000 and the existing rate of 5% will apply between £300,000 and £500,000. The relief will not apply to properties above £500,000.
  • SDLT Higher Rate for Additional Properties – Minor amendments will be made to prevent abuse of relief for replacement of a purchaser’s only or main residence by requiring the purchaser to dispose of the whole of their former main residence and to do so to someone who is not their spouse.
  • Corporate indexation allowance – To bring the UK in line with other major economies and broaden the tax base through removing relief for inflation that is not available elsewhere in the tax system, the corporate indexation allowance will be frozen from 1 January 2018. Accordingly, no relief will be available for inflation accruing after this date in calculating chargeable gains made by companies.
  • Mileage rates for landlords – The government will extend the option to use mileage rates to individuals operating property businesses, on a voluntary basis, to reduce the administrative burden for these businesses.
  • Rent-a-room relief – The government will publish a call for evidence to establish how rent-a-room relief is used and ensure it is better targeted at longer-term lettings.
  • Capital Gains Tax (CGT) payment window – The introduction of the 30-day payment window between a capital gain arising on a residential property and payment will be deferred until April 2020.
  • VAT registration threshold – In response to the Office of Tax Simplification’s report Value Added Tax: Routes to Simplification, the government will consult on the design of the threshold, and in the meantime will maintain it at the current level of £85,000 for two years from April 2018.
  • Non-resident companies & UK property – From April 2020, income that non-resident companies receive from UK property will be chargeable to corporation tax rather than income tax. From that date, gains that arise to non-resident companies on the disposal of UK property will be charged to corporation tax rather than CGT

 Business Rates

  • The government will provide an additional £435 million in support for businesses facing increased Business Rates bills as a result of the 2017 revaluation.
  • The planned switch in indexation from RPI to CPI will be brought forward to 1 April 2018
  • The government will legislate to address the ‘stair-case tax’. Draft legislation will be published shortly.
  • Following the next re-valuation exercise, the interval between valuations will be reduced to three years.

 House-building Investment

The Budget makes available over £15 billion of new financial support for house building over the next five years, bringing total support for housing to at least £44 billion over this period. It introduces planning reforms to ensure more land is available for housing and that the country is maximising the potential of its towns and cities to build new homes:

  • Investment Home Building Fund – loans to SMEs to build homes £1.5 billion
  • Small Sites: infrastructure and remediation –grants for remediation and infrastructure to accelerate the building of homes on small and stalled sites £630million
  • Local Authority house building: additional investment – more borrowing for Councils to build new council homes £1billion
  • Housing Infrastructure Fund: extend – grants to local authorities for strategic infrastructure that unlocks new housing £2.7 billion
  • Land Assembly Fund – assembling fragmented pieces of land into ready to go sites for developers to build homes on £1.1billion
  • Estate Regeneration – transform run-down estates and provide more housing £400mIllion
  • New financial guarantees – to support private sector house building £8 billion

To download this for later reading, click here: UKALA Briefing – Autumn Budget 2017

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