Whether you’re an aspiring first time buyer or property investor, recent tax changes will undoubtedly have affected you, whether for better or worse, says Julie Bloodworth
In the weeks leading up to the Chancellor’s autumn budget the financial press had been speculating on what Mr Hammond might do to win over young people, a generation faced with mounting student debt and unaffordable homes that showed its displeasure with the government at the last election. To be fair the government has been trying to do something about the property issues. Philip Hammond went a step further in his latest budget by removing stamp duty for first time buyers on properties up to £300,000, while for first time buyers in London for properties up to £500,000 there is stamp duty exemption on the first £300,000. So what else has changed in recent years? Not only has the government tried to make it easier for first time buyers to get on the property ladder, it has also attempted to make investing in buy-to-let properties less attractive in an attempt to slow the rise in property prices.
ISA SUPPORT Recent measures for first time buyers include the introduction of the lifetime ISA in April 2017, which allows individuals over the age of 18 and under 40 to save up to £4,000 a year as a deposit towards their first home worth up to £450,000, or to draw it as a pension once they are over 60. If the criteria apply the government will add 25% to whatever the individual saves in the tax year, potentially topping the £4,000 up to £5,000. Prior to the lifetime ISA in 2015 the government had already introduced a help to buy ISA. Using these products, which are still available, any individual over 16 can invest up to £3,000 per year from a minimum of £1,200 up to a maximum of £12,000, and again the government will top up by 25% as long as the funds are used to purchase a first home worth up to £250,000. Individuals cannot use both ISAs, so it is worth taking on which is better. In most cases if an individual qualifies for the lifetime ISA, this is the better option as it is more generous.
BUY TO LET CRACKDOWN On the other hand buy to let landlords have been getting a really hard time. Since April 2016 there has been a Stamp Duty Land Tax surcharge of 3% when any individual buys a second property, which also applies to buy to let properties purchased through companies. Last April also saw the phasing in of a restriction on the amount of tax relief that can be claimed by higher rate tax payers paying interest on a buy to let mortgage. By April 2020 those paying income tax at the higher or highest marginal rate will only ever enjoy basic rate tax relief on the interest that they pay on a buy to let mortgage. It is however a case of supply and demand and the government is conscious of this, hence their commitment to spend £44bn towards building 300,000 new homes by the middle of the next decade, while levying a council tax surcharge on empty properties. With poor returns elsewhere those with money to spare will still see investing in property as an attractive option and whilst property is in short supply prices will continue to rise. ‘This is our plan to deliver on the pledge we have made to the next generation that the dream of home ownership will become a reality in this country once again,’ Mr Hammond said. Only time will tell if his measures are sufficient.
Rawlinsons Chartered Accountants 01733 568321, www.rawlinsons.co.uk