UK Budget 2016: How will Landlords & Property Investors be Affected?

Chancellor George Osborne announced his eighth budget on Wednesday 16th March and measures included the 'sugar tax' on soft drinks, an increase in the ISA limit to £20,000 from April and continued the freeze on fuel duties. Here, Walton Robinson takes a look at the measures from the 2016 budget announcement which affect landlords and property investors with expert views from Managing Director Mark Walton and director of chartered accountancy firm Stephenson Coates, Paul Docherty.

Budget 2016: Key Points with Impact on Landlords and Property Investors

Mark Walton, Managing Director at Walton Robinson Property Consultants gave his insight into the budget and how it will affect property investors;

"For existing landlords we believe the budget will result in a reduction in the number of investment buyers as increased stamp duty will act as a deterrent. Investment property prices will fall, putting some existing Landlords into negative equity and existing Landlords will be taxed more on their incoming rents. Landlords will pay more tax than the profit earned so could end up losing money each year. This doomsday scenario will inevitably lead to an increase in repossessions.

"Walton Robinson predict that the supply of properties to rent will reduce but rents will remain static. First time buyers will pay less stamp duty than an investor so therefore will have a competitive advantage. There will be a smaller supply of properties on the rental market but at the same time a reduction in the demand as numbers of first time buyers increase."

 Mark Walton's Advice for Investors;

  •  If you're going to leave the market leave it before all the tax changes take full effect
  • If you're looking to buy an investment understand the tax implications, don't take high gearing, buy for a good rental return not capital appreciation!


Paul Docherty, Director at Stephenson Coates Chartered Accountantsalso offered us his comment on the budget announcement and the changes it could spell out for landlords;

"The rate at which Capital Gains Tax is levied has been cut for those who sell investments such as shares but this reduction will not be available for buy-to-let landlords.  The main rate of Capital Gains Tax is to reduce from 28% to 20% with the level for basic rate taxpayers being cut from 18% to 10%.  The exclusion of residential property is seen as another attack on buy-to-let landlords and second home owners. These new rates will come into effect from 6th April 2016. 

"This is in addition to the new Stamp Duty Land Tax provisions which start on 1st April 2016.

"There have been some changes to them in the budget, namely that the period where there may be an overlap between two properties has been increased from 18 to 36 months.  It was also made clear that the higher rate will apply equally to purchases by individuals and corporate investors.  The original proposal was that the 3% Stamp Duty would have unfairly favoured large investors at the expense of smaller landlords but the Chancellor has now stated that the 3% charge will apply to larger investors as well.   

"It had been hoped that the Chancellor may abandon his plans to increase Stamp Duty as it may lead to some landlords quitting the sector.  The tax rise may also reduce the supply of rental properties and push up rents.  In addition, the higher transaction costs may deter foreign investors and this appears to be a short-sighted policy within the property market. 

"The above proposals are in addition to those previously announced reductions in allowable expenditure. In particular from April 2016 the wear and tear allowance will no longer be available against furnished property income and will be replaced by a system to deduct actual costs.  Also the restrictions in respect of mortgage interest relief remain and these will start to be phased in from April 2017." 

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