In the aftermath of the most anticipated budget since David Cameron’s new Government in 2010, the budget came largely as expected. There are numerous breakdowns available, but as your property management agent, we’re here to give you a summary of what it means for you as a landlord, and what it means for Hull and East Yorkshire.

In this blog, Liam & Jack will cut through the noise and deliver a summary of property-specific highlights and what they mean for you.

First, and perhaps most significant is the increase of Stamp Duty Land Tax (SDLT) on second homes:

Previously, buyers of both second homes and investment property were subject to paying a 3% levy on the purchase price. This has now been increased to 5%. In real terms, a typical investment property sold for £80,000 will now attract £4,000 in SDLT, up from £2,400 earlier in the year.

As well as affecting those expanding their portfolio, there will also be consequences for those transferring ownership from properties in their own name to a LTD Company, given that they will be liable to pay SDLT as if it were a traditional sale.

How does that affect investment in East Yorkshire?

Hull has always been an attractive place to invest in property because of low prices and comparatively high rents, offering some of the highest returns in the country. Because SDLT is a tax on value, Hull will continue to offer strong rental yields and outperform cities where property prices are considerably higher.

Next in line is Capital Gains Tax (CGT), which has become a contentious issue throughout recent budgets:

We’ve seen a gradual erosion in the 0% threshold over recent years and more recently different rates based on the asset class, with residential property attracting a higher rate than other investments such as stocks & shares.

The Labour Government have decided to increase the rate of CGT for non-residential property from 10% to 18% for standard-rate taxpayers and 20% to 24% for those paying the higher rate of income tax.

Good news for landlords…the rate of tax for investment property has remained the same at 18% and 28% respectively. Further increases were anticipated by some, so we are pleasantly surprised. With non-property-related assets drawing more level, this increases the viability of property investment - specifically those investing more than their ISA allowance each year.

How does that affect investment in East Yorkshire?

East Yorkshire has always been a strong area for those buying with a mortgage and utilising capital growth to fund further investment. Because CGT is calculated based on profit at the point of sale, those using a mortgage to withdraw capital appreciation will continue to avoid CGT, making the use of a mortgage even more attractive.

Is the most significant takeaway the thing that has remained unchanged? - Inheritance Tax (IHT):

The IHT threshold has remained at £325k per individual since the 2009/10 tax year. In that time, we have seen exponential growth in property values, meaning the surviving relatives of many investors are falling into the arms of a large IHT bill.

Given that property values show no sign of slowing down, a larger percentage of investors may be subject to paying IHT should the time come. There are many ways of reducing this burden, and so speaking to a tax advisor and will writer is growing in importance.

Summary

Overall, the amount and severity of changes promised in Labour’s first budget in 15-years have had less impact on landlords and investors than expected. In our opinion, property remains a steadfast and consistent place to invest your money. If anything, this budget places even more emphasis on seeking the right advice and guidance on how to secure and protect your financial future.

Ultralets remains dedicated to helping both new and experienced investors grow, manage (and when the time comes) downscale your property portfolio.

Contact one of the Team below to discuss how any of these changes may impact you personally:

Mortgage & Protection Advisor, Jack: jack.newton@ultralets.co.uk 
Sales Manager, Liam: liam.dunn@ultralets.co.uk 
Lettings Manager, Jake: jake.astill@ultralets.co.uk