This year’s Autumn Statement from Chancellor of the Exchequer Philip Hammond leaves much to be desired from the perspective of buy-to-let landlords and others in the private rental sector. The biggest disappointment was the fact that the Chancellor’s remarks reflected no planned changes to the unfortunate stamp duty hikes, or to dreaded changes regarding mortgage relief.
The rise and fall of stamp duty – or so we thought
The stamp duty increase was announced last spring with this year’s budget, by Hammond’s predecessor George Osborne. It lowered the value threshold for the homes falling under the tax, and increased the rate significantly on those properties that could be considered a second home.
The idea was to discourage people from buying second and third homes and free up UK housing stock to stifle rising costs. But the change has put major brakes on the housing market, and has not raised nearly as much money as its boosters predicted.
Analysts say that the Exchequer has brought in less than half of the £700m the stamp duty was expected to generate. It has also hit buy-to-let landlords hard, since many of their properties are considered second or third homes under the law.
It was widely thought (or hoped!) that the change in Chancellors that happened this summer would lead to a paring down of the law, or at least a review of the tax.
There was major action on the buy-to-let market at the beginning of the year before the stamp duty hike, but now those investors seem to have stopped expanding their property portfolios. They are also borrowing a whole lot less, so the tax hike has had serious repercussions for multiple areas of the economy.
Many landlords have pointed to stamp duty in particular as being the thing that has held them back the most from expanding their businesses over the course of this year.
Experts believe that a repeal or reduction of the stamp duty would be far and away the best option for giving the market the little kick it needs, but so far the new administration does not seem to agree.
Tax relief will go ahead and get scaled back
Another upcoming change that’s going to affect landlords has to do with gradually scaling back property-related tax relief. Buy-to-let landlords are currently allowed to use tax relief to offset all of their mortgage interest, but as of this spring the phasing out of this rule will begin.
The change has been scheduled to happen in steps with nearly half a million basic-rate payers being pushed into the next higher bracket in April 2017, and the relief for higher-rate payers scheduled to be gutted over the next three years.
The move has been expected to force landlords to push the costs onto tenants by increasing rents – and thus gravely affecting the frequency of tenant default.
Commentators had hoped the new chancellor would also propose a fix for this problematic situation, but no sign of such a move appeared in the Autumn Statement.