Budget 2012 at a glance ( Landlord's & Investors )
If you are a landlord or property investor, you might be thinking what has the chancellor done? am I better off or not?.
The answer is Property investors / landlords are winners and losers in Chancellor George Osborne’s Budget 2012.
Landlords who are currently paying tax on all rents are likely to be winners as they will definitely benefit from the increased personal allowances for income tax nearer the £10,000 target. Top-end market investors who are dealing in buying and selling the most expensive properties are the focus of big increases in stamp duty, so it’s bad news for them.
From 6th April 201, the controversial 50p top rate of income tax will drop to 45p. In my humble view, it’s a good thing, especially when HM Revenue & Customs have revealed the rate is causing massive tax distortions. The chancellor also admitted that the 50p tax rate didn’t raise significant sum of money. The Treasury estimates the tax cut will raise an extra £0.5 billion in tax; we will have to wait and see if these calculations are correct. This could have interesting effects for the property market. A reduction in tax will give top earners a little more money to play with and they may choose to put this money back into property. More demand, of course, equals a rise in prices which will make the market more competitive but the value of your property more.
Income tax rates stay the same – but the personal allowance goes up a £1,100 increase from April 6, 2013 to £9,205 before anyone pays and tax, this is certainly good news. This increase in allowance will slash tax bills by around £220 every year for basic rate taxpayers after stripping out inflation, with 24 million earning less than £100k gaining more money in their pockets.
Capital gains tax
Non-residents owning properties worth £2 million or more via an offshore company will have to pay capital gains tax on disposal, so will most wealthy property investors. Capital gains tax for landlords selling buy to let properties is unchanged. The Chancellor has previously stated he does not expect to change this during the life of this Parliament.
Corporation Tax rates for small companies stay the same, but the main rate for larger companies drops by 2% to 24% plus two further on the way to bring the rate to 22% by 2014.
The biggest headline for landlords from yesterday’s budget was undoubtedly the rise in stamp duty. Stamp duty on properties worth £2 million plus owned by a company goes up to 15% with immediate effect, while the general rate of stamp duty on homes worth £2 million or more increases to 7%. This is a tax that is certainly going to deter possible investors purchasing properties of that size and it is unclear how it will affect landlords. I have written to the chancellor today to clarify this and also want him to consider an excemption if a large property was developed and split into many smaller properties. This would get more homes on the market for first time buyers. If it was split and is going to be rented then it will help with the shortage of rental properties in Brighton & Hove. My concern is that for this specific scenario, it’s unfair for the developer or the landlord to pay this tax. I would like to see an exemption for this kind of projects.
The amended forecasts for growth look positive for the UK despite the deepening Euro zone crisis. I believe that we’re firmly out of recession now. It might not feel like it but the economy is growing and we are on the right track.
The budget could have been considerably worse for landlords and it looks like we have an interesting year ahead of us. The full budget report is still available online; if you need more details please visit (http://www.bbc.co.uk/news/uk-politics-17449501 )
All that remains now is to wait it out and see how the changes take effect.
if you are a landlord or a property developer not sure on the impacts this budget is going to have on you them, please contact us on 01273 672 333, we can give you free impartial advice,shold you wish to obtain a much more detailed specific advice then our in house financial advisers or tax specialist will be able to help you.