George Osborne has recently delivered the July 2015 budget, in which he made many announcements including changes to welfare and pensions, housing, minimum wages, and much more. Please take a look at the announcements below regarding the housing market to see how they may affect you.
Buy to Let
Currently, individual landlords can deduct their costs, including mortgage interest, from their profits before they pay tax on their rental income. This gives them an advantage over other home buyers. Wealthier landlords receive tax relief at 40% and 45%. This tax relief will be restricted to 20% for all individuals by April 2020.
In addition, from April 2016, the ‘wear and tear allowance’, which allows landlords to reduce the tax they pay (regardless of whether they replace furnishings in their property) will also be replaced by a new system that only allows them to get tax relief when they actually replace furnishings.
The government will increase the Rent-a-Room relief from £4,250 to £7,500 a year from April 2016. The value of this relief has been frozen since 1997, so this increase will allow individuals who rent a room in their main residence to do so tax free on income up to £7,500 to reflect increases in rents across the country.
From April 2017, each individual will be offered a family home allowance so they can pass their home on to their children or grandchildren tax-free after their death. This will be phased in from 2017-18.
The allowance will be gradually withdrawn for estates worth more than £2 million.
Rents for social housing will be reduced by 1% a year for the next 4 years, and tenants on higher incomes (over £40,000 in London and over £30,000 outside London) will be required to pay market rate, or near market rate rents.
For further information on how the budget will affect you please call your local Foxwood Maclean agent who will be more than happy to explain the changes to you in more depth.