By Rebecca Wilkinson, director, Menzies
The Chancellor has made it clear that he wants to make “the dream of home ownership a reality for all generations” and has announced both immediate and longer-term policies for making this happen.
Part of the Government’s home ownership strategy is to assist young people get on the property ladder by scrapping Stamp Duty Land Tax (“SDLT”) for first time buyers. But whilst this relief will be popular with those saving to afford their first home, unless there is an increase in the availability of homes worth less than £500,000, it is likely to push up house prices due to increased demand. The longer-term benefit to first-time buyers may therefore be diluted, as houses will become more expensive.
The second part of the Government’s home ownership strategy is to increase housing supply by making available a further £15.3bn of financial support for housing over the next five years and by introducing planning reforms that will ensure more land is made available for the construction of new homes.
For any landlord who has recently transferred residential property to a limited company to avoid the new interest restriction rules, the abolition of indexation allowance from January 2018 will be a disappointment.
Whilst indexation allowance does not provide a huge tax saving, it has still been one of the advantages of holding properties in a company, as it reduces the tax charge when the properties are sold, leaving more money available for re-investment. Although the abolition of this allowance will affect all companies that own chargeable assets, its loss is likely to be felt most by property investors, who typically hold high-value assets and the move could be seen as yet another attempt by the Government to target landlords.
An even bigger blow will be felt by non-resident investors in commercial property, as it has been announced that the current non-resident tax exemption on the sale of these properties will end in April 2019. Further changes affecting non-resident landlords are expected in April 2020.
Detailed guidance is yet to be published, but could make a huge impact on anyone currently being taxed under the non-resident landlord scheme, and on future home ownership.