If you are a Landlord, you’ll be relieved to know that there are no new decisions affecting you. However previously announced change regarding tax relief is introduced next month. Currently, all mortgage, estate agent and property costs can be deducted from rental income before your tax liability is calculated. From April 6th 2017, the maximum relief that you can gain is 75%. By 2020 a flat rate of 20% tax relief will be introduced.
When the tax relief limit was announced, many Landlords decided to run their rental properties through a limited company, as full mortgage interest deduction remains available. Traditionally, the tax-efficient way to extract money from a limited company is via dividends. This week, the Chancellor announced that the tax-free dividend allowance will be reduced from £5,000 to £2,000. Landlords should now question whether a limited company is a cost-effective management structure for their property portfolio.
No new initiatives were announced to help buyers to save for or buy properties – although the Cash ISA maximum investment increases to £20,000 on 6th April this year. The current initiatives are:
- The Lifetime ISA (launches on 6th April). For every £1 you save into the account, the Government will contribute another 25p and it’s all tax-free. The annual contribution limit is £4,000 which puts the maximum Government bonus available at £1,000 a year.
- The Help to Buy ISA means the Government will boost your savings by 25%. So, for every £200 you save, receive a government bonus of £50. The maximum government bonus you can receive is £3,000.
- Help to Save, set to launch in April 2018, will give lower-income savers who can save £50 a month a tax-free bonus of up to £1,200.
This remains the same. The opportunity to increase the threshold and banding for stamp duty would have encouraged buyers to commit to property purchase. The average home buyer in London faces a £21,000 stamp duty bill.
House Price Predictions
The Office for Budgetary Responsibility (OBR) released its predictions for house price growth together with Hammond’s Budget - stating UK house price growth will fall by almost half by 2019. According to their predictions, house prices will drop from an annual inflation of 7.6% in 2016 to just 4% in 2018. Then, in 2019, growth will edge upwards to 4.4%, rising to 4.6% in 2021.
But as the OBR has predicted, price growth will not slow for long as this is primarily due to a chronic lack of supply; money is as cheap as it can be to borrow at the moment, so if you are hoping to get on the property ladder in London, this may be the perfect opportunity to grab a good deal and enjoy the security of owning a home. (Property Reporter)
What was missing? Maximum tenancy terms. An increasing number of people are renting rather than owning their homes. The opportunity to offer security by extending the maximum tenancy term beyond three years was not taken.
“The property market is experiencing many changes at the moment,” says Jason Dyer of JTM Homes. “If you are unsure of how it affects your current position within the property market – or your future plans, please contact us for a chat. We’re happy to answer your queries.”
JTM Homes is an independent estate agency with offices in Highgate and Archway.