Budget 2016 - was it a sweet deal for the property sector?

Wednesday 16 March 2016

With the furore of the 2016 Budget now over, we take a look at some of the biggest announcements that Chancellor George Osborne made. You've probably heard how it wasn't a sweet success for the drinks industry, but what about the property industry, planning policy, businesses and employees?

Capital gains tax - goods news for investors, as long as you're not a landlord!
Without doubt, one of the biggest topics for business professionals was that of capital gains tax changes. 

From the start of the new tax year (6 April 2016) the higher rate of CGT will be cut from 28% to 20%, with the basic rate being cut from 18% to 10%. 

However whilst many investors would have delighted in the news and been clapping their hands at the prospect of keeping more of their hard-earner their profits, sadly we were to hear that this reduction in CGT did not in fact apply to buy-to-let properties. 

The Chancellor has quite shockingly decided to exclude the sale of buy-to-let properties from the windfall, for which the older higher rates will still apply, contributing to a running theme of measures which penalise landlords and seem at odds with the wider policies designed to end the current shortage of available homes to rent in the UK. 

For businesses
Good news for lettings agents who rack up high mileages attending viewings and other business meetings as the Chancellor decided to lay off increasing fuel duty again. 

From April 2017, small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates. Currently, this 100% relief is available if you’re a business that occupies a property (e.g. a shop or office) with a value of £6,000 or less.

The way stamp duty on freehold commercial property and leasehold premium transactions is calculated will change. Currently, these rates apply to the whole transaction value. From 17 March 2016 the rates will apply to the value of the property over each tax band.

The new rates and tax bands will be 0% for the portion of the transaction value up to £150,000; 2% between £150,001 and £250,000, and 5% above £250,000.

Buyers of commercial property worth up to £1.05 million will pay less in stamp duty.

Stamp duty rates for leasehold rent transactions will also change, with a new 2% stamp duty rate on leases with a net present value over £5 million.

ICBA Chair David Broschomb welcomed a number of the changes, on behalf of small businesses:
"With the level of business rates an ever growing cost for small business, the Chancellors increase in support levels suggests that a substantial number of small businesses will be exempt from business rates. This will also effect individuals considering buying a commercial property, whether trading or not."

"Naturally the increased threshold levels of Stamp Duty are also welcome. However, this tax is still a substantial cost to purchasers and invariably effects the market in commercial properties. Due to increases in commercial property values in recent years even a small local business or property falls within the 2% higher bracket bracket".

" The more attractive a business proposition appears the more fluid and active the commercial property market becomes".

For employees
The personal allowance has been increased to £11500 (currently £10600).

The threshold at which people pay 40% income tax bracket has moved from £42,385 now to £45,000 in April 2017 meaing more money in your pocket if you're a 'middle income' earner. 

For the self-employed
From 2018, if you're one of the 3.4 million people who are self-employed you will no longer have to pay what are known as Class 2 National Insurance Contributions (NICs).

Class 2 NICs are currently payable on annual profits of £5,965 or more in addition to Class 4 NICs (on profits of over £8,060).

Whilst it doesn't amount to big savings for the self-employed (the current cost is only £2.80 a week), every penny counts as they say!

For savers and first time buyers
The big news here is that the Government will introduce a new 'lifetime ISA' designed for first time buyers and those saving for retirement, with government putting in £1 for every £4 saved.

The snag being that if you're already over 40, you won't be able to benefit from the new ISA. And with first time buyers getting older with each year that passes, it's quite a restriction and frustrating for many who will have missed the boat.  

People can save up to a maximum of £4,000 towards a home deposit or retirement every year until they turn 50.

The bonus is paid at the end of each tax year, that you're aged 18 to 50. So it means that you'll be able to earn interest on the bonus, or get investment growth from it, in future years. When withdrawing money, any bonus for that tax year will be paid at the point of withdrawal.

You can continue to pay into your Lifetime ISA between the ages of 50 and 60, you just won't get the state bonus in these years, but you'll obviously be able to earn interest on the total amount. 

The annual tax-free limit for regular ISAs will rise from £15,240 to £20,000. 

 Other:

  • Purchasers will have 36 months rather than the originally proposed 18 months to either claim a refund from the higher rates or before the higher rates will apply, in the event that there is a period of overlap or a gap in ownership of a main residence.
  • The delivery of 13,000 affordable homes two years early by bringing forward £250 million of capital spending to 2017-18 and 2018-19
  • New measures to speed up the planning system, including minimising the delays caused by planning conditions, and ensuring the delivery of local plans by 2017
  • A consultation on options for increasing transparency in the property market (the already launched BIS consultation)
  • Collaboration between Local Authorities and Central Government on a local government land ambition, working with their partners to release land with the capacity for at least 160,000 homes, helping to support the Government’s policy on estates regeneration
  • The Homes and Communities Agency will work in partnership with Network Rail and local authorities to provide land around stations for housing, commercial development and regeneration
  • The Government will legislate to make it easier for local authorities to work together to create new garden towns, as well as consult on a second wave of Compulsory Purchase Order (CPO) reforms
  • The Government will provide technical and financial support to areas that want to establish garden villages and market towns of between 1,500 to 10,000 homes