The budget 2015 will affect Landlords and the property market whether you are own a property in Walthamstow or in any other part of the country. Most directly affected are Buy-to-let landlords and housing association tenants.
The major change is the announcement to limit tax relief on mortgage interest payments for residential property to the basic rate of tax. This change to be phased in over 4 years from April 2017 will reduce the amount of tax relief available to landlords and is likely to reduce incentive for landlords to invest in property. The impact is more likely to impact areas of high rents and prices but may be felt across the country.
Social housing providers in Walthamstow and country-wide, are also facing major changes. They will be forced to cut rents by 1% per year over the course of the Conservative’s 5 year tenure. This is obviously going to prove testing for social housing providers across the country. With the planned extension of the right to buy policy, allowing more tenants to buy their homes, providers may find it difficult to deliver a sufficient number of social houses in the future..
Corporation Tax and Student Fees
The changes have come as part of a government initiative to cut £21bn from the welfare budget. Amongst other welfare cuts, including the abolition of University grants and a cancellation of housing benefit for those aged between 18 and 21, there has also been a removal of tax relief on inheritance tax on residential properties.
Corporation tax will also be cut to 18% by 2020, a move which aims to increase the attractiveness of Britain to foreign companies looking to set up base in the UK. It is also hoped that the tax cut will encourage investment from sources at home and abroad. This may fuel the demand for property in Walthamstow and Leyton, from foreign investors even more.
The budget also announced new powers to the regions of England. The newly formed Greater Manchester Authority will gain significant powers over land reform and talks have been opened with Leeds and Liverpool to hand over similar controls. In the wake of these new announcements, the Office for Budget Responsibility published its latest growth forecasts, which indicate a slight improvement from previous years.
In our opinion, the Chancellor, in a bid to limit the substantial growth in buy-to-let properties, may be playing a dangerous game. In a market with tight supply of rental property it is not prudent to try and reduce the incentive for landlords to invest in property by reducing the tax relief available.
A further deterrent, in the form of replacing the 10% wear and tear allowance with a new system of deducting the exact amount of expenses, has also been announced. It seems likely that Walthamstow and Leytonstone landlords, may increase rents to compensate for any added tax liability they may incur. The higher rent could also result in tenants remaining in rented accommodation for longer as they struggle to save a deposit to buy a home. Any changes in the market require a holistic approach with the aim to strike a balance between incentives for landlords and keeping rents in check for tenants.
If you would like any more information on how the new budget may affect your status as a tenant, landlord, or homeowner, please do not hesitate to call Waltham Estates on 020 8509 0444 or visit us at our offices, Hoe Street, Walthamstow, E17.