Autumn Budget Increases Tax on Limited Company Landlord Investments

The Autumn Budget was released yesterday by Chancellor Phillip Hammond, with several key amendments that affect the UK buy to let sector.

The most significant impact of yesterday’s Budget was that buy to let investors who have set up as limited companies will now face an increase in taxes when they sell their properties. Indexation, a tax relief allowing gains to be reduced depending on the duration of property ownership, will be frozen from January 2018. Many buy to let landlords moved their businesses to a company structure in recent years in a bid to avoid the Government’s crackdown on property investment tax relief.

Important announcements made in the speech included the promise of a government consultation looking at the barriers placed upon landlords aiming to offer longer, more secure tenancies if there is demand from their tenants.

The controversial Universal Credit scheme was acknowledged, and from February 2018 the government will remove the seven-day waiting period, meaning that recipients will be entitled to the benefit from the first day of their application. The change should make the benefit less problematic for landlords who have been concerned about its effect on their tenants’ finances.

An access scheme was also implemented. The government is set to provide £20 million in funding for schemes aiding those at risk of homelessness to sustain private tenancies.

In order to help the current housing crisis, the government is also keen to bring empty properties into use, and has thus imposed a rule to increase the council tax premium from 50 per cent to 100 per cent for uninhabited properties.

There will be a delay in the introduction of the 30-day payment window between a capital gain arising on a residential property and payment until April 2020.

The government also decided to extend the option to use mileage rates to buy to let investors, on a voluntary basis, to reduce the administrative burden for landlords. The corporate indexation allowance will also be frozen from 1 January 2018, bringing the UK in line with other major economies. Relief will not be available for inflation accruing after this date when calculating chargeable gains made by companies.

Finally, there was no change in the Stamp Duty land tax levied on landlords and property investors, however the Autumn Budget saw it abolished for first-time purchases up to £300,000.

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