What does the Budget Mean For Us?

What does the Budget Mean For Us?

Earlier this week we met as a team and were notably hawkish about what may come to light this week in the the budget. The chancellor told us what we all already knew, the future is indeed uncertain. In this, the so-called “budget for the next generation” we have a number of key takeaways and thoughts.

Keeping politics and personal opinions out of the blog, we have included below just the facts as we see them, and the major factors that will cause an impact to the people we work with on a day to day basis. We are happy to discuss any of the key points here and how they will affect you. Either call us on 0161 681 3724, or leave a note in the comments section at the end of the blog and we’ll respond and open up the debate.

 

Landlords and second homeowners

Stamp Duty

A 3% Stamp Duty surcharge on second homes and Buy to Let properties from 01 April 2016 will be introduced and larger investors will not be exempt as previously thought from the stamp duty charges, meaning all purchasers of Buy to Let properties will pay the additional tax. This was expected not to be of concern to people owning 15 or more houses however this isn’t the case it applies to everyone.

 

21st March – Mortgage Credit Directive

From 21st March consumer buy-to-let mortgages (on rented properties that are not being used as part of a business) will be regulated by the Financial Conduct Authority (FCA). Second charge mortgages (also known as secured loans) will also come under regulation. This could mean that financing deals become a little harder

 

Taxation

Capital Gains Tax (CGT) will be cut from 28% to 20% for higher rate taxpayers and from 18% to 10% for basic rate taxpayers. Residential property sales and carried interest will be exempt from Capital Gains Tax (CGT) being introduced on 06 April 2016.

There will be an 8% surcharge to landlords selling a buy to let property meaning this benefit is not being passed onto landlords. We consider the reason behind this that because of recent tax changes in stamp duty and also the clause 24 meaning less tax relief on mortgages of BTL property’s (unless held in a ltd Company) many landlords are already considering selling if they were to benefit from the CGT reduction this would encourage more meaning an increased amount of property to the market that may create a crash in prices.

 

Rents

We consider all the recent changes in tax and legislation on current landlords will increase the rents. There will be more landlords moving out of the market along with no large increase in building will increase demand. As LHA rates are frozen for the next 4 years this will mean either attracting working tenants or expecting LHA tenants to top up their rents.

 

THE NOTHERN POWER HOUSE

We all have our own views on the current effectiveness of the Northern Powerhouse, or lack thereof, but the budget statement did have some promising news for our region, my key takeaways were:

Homelessness

A major issue for Manchester – and one the government has been under pressure to address.In response the Chancellor strayed out of his usual territory to set up a £115m fund to help tackle rough sleeping. Most of that will be used to provide ‘low cost’ accommodation for people leaving hostels before they get into regular housing, creating 2,000 new beds.

It is also delaying a planned cap to local housing allowance by a year – and getting immigration officials to work more closely with local authorities to send back EU migrants who end up sleeping rough, a significant problem in Manchester.

The city has seen rough sleeping rise tenfold since 2010 and there is no sign of that rise slowing.

It is so far unclear how that money will be allocated – whether it will be done according to population size or the current rough sleeping figures.

Nevertheless the big structural problems that underpin our rising homelessness still remain: cuts to benefits and a chronic housing shortage but this is only expected to get worse by the unfair taxing of landlords

Buisness Rates

Greater Manchester has been handed control of all its business rates in replacement of its main central government grant.

Along with Liverpool and London, the area will move towards a model where it is far more reliant on the taxes it raises from local firms going forward.

At first sight the figures for 2016 would suggest Greater Manchester as a whole will be £80m better off as a result.

However there are all sorts of unknowns – including what happens if a huge economic downturn hits the region, such as when the steel industry collapsed in the north east.

There are currently revaluations taking place across the country, due to come in in 2017, that will be used to reset the amount paid by businesses in rates – so that could dramatically alter the amount of income available to councils.

Within Greater Manchester there is the issue of how the money will be redistributed, given that as it stands areas such as Rochdale and Oldham would lose out significantly compared to those such as Manchester and Trafford, which would gain enormously.

But perhaps the biggest danger is also contained within the Budget: thousands of small businesses – 90,000 across the north west – being taken out of business rates altogether.

That looks dangerously close to making a very generous tax cut – and making town halls pay the price.

Transport

High Speed III train between Manchester and Leeds has been given the green light. This will only help as increased infrastructure and improved transport can only help house pricesProbably the most significant part is £161m for the Highways Agency to speed up improvements to the M62 on both sides of Manchester , but money was also committed towards bringing town train journeys between the two cities to half an hour.

He also found £4m towards the eventual transformation of Manchester Piccadilly – and other northern stations – ahead of HS2’s arrival in more than a decade’s time.

CRIMINAL JUSTICE

Greater Manchester is to become the first English region to get new powers over the criminal justice system.

Chancellor George Osborne used the Budget to announce further devolution of powers to the area.

The change means decisions on offender management, education in prisons and work with youth offenders will be made locally.

The region’s Labour mayor, Tony Lloyd, said “we will have to read the fine print” to make sure there is “no loss”.

The Chancellor also announced the region will get a new prison and will keep 100% of business rates, beginning next year. Greater Manchester Combined Authority, which comprises the region’s 10 councils, said it will have more control of funding to support both offenders and victims of crime.

It is proposing devolving other budgets, including for female offenders, young offenders and those sentenced to fewer than two years in prison, which would mark a major change to the current system.

Announcing the change, Mr Osborne said: “This is the kind of progressive social policy that this government is proud to pioneer”

 

Queens Speech 2015 – What it means for Landlords & Investors

Among the many measures to introduce more legislation these are the ones which will affect landlords and property investors

Immigration Bill

downloadThe government is promising to “control immigration” and put “hard-working British families first”. Its Immigration Bill is designed to support working people, clamp down on illegal immigration and protect public services.

Specifically, it will include a new offence of illegal working – with police given the power to seize the wages paid to illegal workers as the “proceeds of crime”.

There are also proposals to deal with unscrupulous landlords and to evict illegal migrants more quickly, while all foreign criminals awaiting deportation will be fitted with satellite tracking tags.

It will also become an offence for businesses and recruitment agencies to hire abroad without first advertising in the UK – a policy which featured prominently in Labour’s election manifesto – and a new enforcement agency will be set up to tackle what the prime minister called “the worst cases of exploitation”

Housing Bill

imagesPlans to support home ownership and extend the right-to-buy scheme to 1.3 million social housing tenants in England feature in a new Housing Bill. Under the plans, housing association tenants will be able to buy the homes they rent at a discount.

There will also be help for first-time buyers, with 200,000 starter homes made available to under-40s at a 20% discount. Both are commitments which were included in the Conservatives’ general election manifesto.

The government says the bill will increase the housing supply and ensure local people have more control over planning.

 

Full Employment and Welfare Benefits Bill

 

images (1)This bill, as the name would suggest, is designed to achieve full employment “and provide more people with the security of a job”. The aim is for two million more jobs and three million new apprenticeships to be created. Ministers will be required to report annually to Parliament on their progress. The legislation will also implement a planned reduction in the welfare cap – from £26,000 to £23,000, and freeze working-age benefits, tax credit and child benefit for two years.

As part of the government’s welfare reforms, young people will be required to “earn or learn”, with automatic entitlement to housing benefit for 18-21-year-olds scrapped

 

 

HS2 Bill

 

download (1)The government is pressing ahead with legislation that will eventually enable work to start on the £50bn HS2 high-speed rail link. Legislation which will give the government the legal powers to construct and operate the London to Birmingham first phase of HS2 is going through Parliament. If it progresses smoothly, it should receive Royal Assent around the end of 2016, with work beginning on the project in 2017, with a finishing date of 2026.

Extremism Bill

imagesThis includes measures to tackle broadcasting of extremist material. The government wants to strengthen watchdog Ofcom so that it can take action against channels that transmit extremist content. The legislation will also propose the introduction of banning orders for extremist organisations who use hate speech in public places, but whose activities fall short of proscription. A new power to allow police and local authorities to close down premises used to support extremism will also feature. And employers will be able to check whether an individual is an extremist and barring them from working with children.

Draft Public Service Ombudsman Bill

images (2)This is the one draft bill to feature in the Queen’s Speech. It proposed to reform and modernise the Public Service Ombudsman sector to provide “a more effective and accessible final tier of complaints redress within the public sector”. It would absorb the functions of the Parliamentary Ombudsman, the Health Ombudsman, and the Local Government Ombudsman and potentially the Housing Ombudsman.

 

What do you think about the Queens Speech? Get in contact with us today to discuss.

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