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How has the 2018 budget affected landlords and tenants?

It says a lot about recent budgets that buy-to-let and student property investors will probably be celebrating the latest one purely because it didn’t contain any of the hammer blows dealt by some of the other budgets we’ve seen over the past few years.

It’s not all rosy and you could make quite a strong case for arguing that the latest budget does have the air of being one which is more about solving problems of the government’s making than actually taking steps forward, but it’s by no means seriously bad and overall may even be of benefit to landlords.

The main piece of bad news – lettings relief is set to be reworked

As pieces of bad news go, this one is fairly mild. At current time, buy-to-let investment landlords who let out their principal private residence can claim tax relief on up to £40,000 of capital gains when the home is ultimately sold. Going forward, this will only apply when a landlord shares their home with a tenant, or, more accurately, two or more tenants, since, under current rules, a landlord with a sole lodger would qualify for principal private residence relief in any case (meaning no capital gains tax would be payable as long as the home was sold within the allowed period, currently 18 months).

While the government is presenting this as closing a loophole in the law, it’s arguably a bit of a grey area since lettings relief was typically of benefit to people who either couldn’t sell their houses or people who wanted to let out their main residences on a temporary basis while they spent some time somewhere else.

In other words, it was a small tax break for accidental/temporary landlords rather than a major benefit to property investors. It will, however, net the government some £500M from 2020 to 2024 (according to estimates) and is likely to be a fairly straightforward sell to most of the electorate, hence it seems highly likely that this proposal will go through.

Affordable housing pops up again

The topic of affordable housing pops up on a regular basis and this budget was no exception. The takeaway points are that there is £500m for the Housing Infrastructure Fund to build 650,000 new homes and that first-time buyers’ stamp-duty relief will apply to those buying shared equity homes of up to £500,000. Frankly neither of these measures seems likely to make noticeable inroads into the chronic under-supply of housing in the UK, especially not affordable housing, or diminish the demand for rental property.

Those on lower incomes should be better off

A 4.9% increase in the National Living Wage (to £8.21) and an increase in the personal allowance (to £12,500) will both benefit lower-earners and middle-earners will be happy to hear that higher rate tax band will kick in from £50,000 per year. This may benefit some, smaller scale, student property investment landlords directly, but the main benefit is likely to be indirect as tenants should hopefully feel some financial breathing space and hence be less likely to get into arrears.