How the 2018 budget will affect landlords?
2nd November 2018
Capital gains tax
The yearly exempt figure increases from £11,700 to £12,000 after April 6th 2019. This means that individual taxpayers will not have to pay Capital Gains Tax (CGT) on their first £12,000 gain. The rate remains at 18% for basic rate tax payers and 28% for those paying higher rate income tax. On the flip side, husband and wife landlords can sell a buy-to-let home they both own at 50/50. They will benefit from no CGT on the first £24,000 of any gain. Providing the couple are both basic rate taxpayers, the tax is based at 18%.
Principal residence relief
From April 2020 anyone who has lived in a buy-to-let home which they are selling will be allowed to add 9 months (reduced from 18 months) to the time they have lived in the property as their main home. Due to this capital gains tax can be reduced.
Regarding letting relief, When Landlords sell their property, they will no longer be able to claim the £40,000 back on their capital gains tax bill. From April 2020, lettings relief is only available to a landlord who shares a home with a tenant.
Lettings relief is a valuable relief that may reduce the capital gains tax (CGT) payable on the sale of a property, which was at some point used as the taxpayer’s only or main residence, and which has also been let as residential accommodation.
Personal allowance increases from £11,850 to £12,500 from April 6th 2019. The higher rate threshold goes up from £46,350 to £50,000 also from April 6th 2019. This means you will be able to earn £12,500 per year without having to pay any income tax.
Annual investment allowance
For businesses & landlords, the annual investment allowance for capital spending will rise from £2,000 per year to £1m for two years in January 2019.
The 2018 Budget has impacted somewhat almost every landlord across the UK. In most other businesses you are able to write your costs off against your income, but landlords can’t do this with mortgages any longer. This and the rest of the changes is not pleasing landlords, however it’s something they have to abide by and accept.
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