As with any budget, there will always be winners and losers, so how will the 2015 budget affect the property market and how will you fare?
The biggest impact will be felt by landlords as George Osborne has pledged to cut tax relief on mortgage interest for private rental properties. By 2020 you won’t be able to claim back 40 per cent on the interest, only 20 per cent. All relief is coming down to the basic rate of income tax. So if you are a private landlord not only will you pay tax on what you earn, but you will now also pay tax via your mortgage. With this in mind we feel the budget now favours home owners over buy to let landlords.
With this trigger we may see many current tenanted property come to market which is good news for first time buyers and landlords looking for a new affordable investment unless it puts off new buy to let investors even entering the market.
Landlords are also losing the 10% wear and tear allowance. You are now only able to claim against cash actually spent.
‘First, we will create a more level playing-field between those buying a home to let, and those who are buying a home to live in’.
‘Buy to let landlords have a huge advantage in the market as they can offset their mortgage interest payments against their income, whereas homebuyers can’t. The better off the landlord, the more tax relief they get’.
‘For the wealthiest, every pound of mortgage interest costs they incur, they get 45p back from the taxpayer’.
Said the Chancellor, George Osborne.
At the top end of the market UK non-dons have perhaps been hit hardest. Those who have lived in the UK for 15 of the 20 previous years are now to start paying tax on their worldwide incomes and capital gains just like everyone else. Analysts predict that ‘many famous billionaires who have lived in Britain for many years and who undoubtedly helped inflate the London property bubble are now likely to sell out’. After all if the UK is no longer a tax haven why not live somewhere warmer? This could result in a fall in prime London prices.
On a positive note parents and grandparents will be able to leave homes worth up to £850,000 to their children without them paying inheritance tax from 2017, rising to £1 million by 2020.
The move, first pledged as part of the Conservative Party pre-election manifesto, means that once fully in motion, each parent will be able to leave £500,000 in property – up from the current £325,000 per person – without paying the tax.
For an informal discussion on your position in the market contact Sophie Bullock on 0121 362 7878.