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Budget: The good, not so good and questionable changes.

The red briefcase has made its first outing this year and delivered the good, the not so good and the somewhat questionable changes to the property sector.

The property highlights included:

  • A review of the property buying process
  • No stamp duty exemption for larger buy-to-let investors
  • New lifetime ISA for a first-time purchase or retirement
  • Cuts to capital gains tax, but not for property
  • Stamp duty reform for commercial properties
  • Money Advice Service to go

Shake-up on buyer process

The property buying process is set for a review following the Government’s announcement that around £270m each year is spent on failed housing transactions.

This review will no doubt be welcomed by all buyers who live in fear of a house sale falling through although the Government have not yet set a date for the commencement of the review.

Larger buy-to-let investors feel the sting

It looks like there’s no let-up for larger buy-to-let investors when it comes to stamp duty, so the 3% charge will remain when purchasing a second property from 1st April.

The exemption was potentially going to apply for landlords with 15 or more properties, but the Government has turned down proposals.

This is a major blow for buy-to-let investors who were hoping for a little respite.

New lifetime ISA

It’s certainly a good time to take that step on to the property ladder, there are more incentives than we have ever seen and this latest scheme is another positive step, not only for first-time buyers but for all savers.

The Government will be introducing a new lifetime ISA in April 2017 to allow consumers to save for their retirement or their first property.

People under the age of 40 will be able to contribute up to £4,000 a year into a new ISA and the Government have pledged to top up £1 for every £4 deposited up to the age of 50. Funds can be used for a first home or withdrawn after the age of 60.

Savings can be accessed at any time prior to that, but the bonus will have to be returned and a 5 per cent charge will be levied.

Tax is taxing

Businesses will no doubt be happy with capital gains tax reducing from 28% to 20% in three week’s time, however, they will remain at the current levels for residential property and interest.

The Chancellor said: “Our capital gains tax is now one of the highest in the developed world, when we want our taxes to be among the lowest.”

Commercial property stamp duty will now have a system similar to income tax: when a purchase passes a tax threshold it will have a higher rate applied for that part.

This system is simpler and aligned to residential tax, which has a similar ‘slice’ system: zero rated for properties up to £150,000, a 2% rate on the next £100,000; and a 5% top rate above £250,000. There will also be a 2% rate for those high value leases with a net present value above £5m.

Farewell to Money Advice Service (MAS)

Following a review of guidance services, Mortgage Advice Service (MAS) will be closed. To many advisers (who may not have appeared supportive of MAS), it is actually seen as a backwards move and we’ll wait to see what this new ‘frontline’ service will look like. MAS served as an important source of information for consumers.

It moves the job of guidance on to firms, with the support of the FCA, which sounds more like a budget cut than a consumer-focused plan.

Henry Knight, Director, Springtide Capital said: “The budget has certainly delivered a range of changes, some of which are more welcome and sensible than others. I do for instance; welcome a change in the buyer process, as sales fall through in many cases through no fault of the buyer. Encouraging young savers is also a move in the right direction to stimulate the housing market, as is helping people to save for their retirement as they shouldn’t rely on a Government pension alone.

“From a tax perspective, I never thought an exemption was on the cards for buy-to-let investors, no matter how welcome. The capital gains tax reductions will be music to business’ ears, as will a better system for stamp duty on commercial property.”

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Important Legal Information
There may be a fee for mortgage advice. The precise amount will depend upon your circumstances and loan amount. The FCA does not regulate most buy-to-let, second charge or commercial mortgages. The Financial Ombudsman Service is available at www.financial-ombudsman.org.uk or by contacting them on 0800 023 4 567. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

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