Backtracking on the contentious cuts to Working Tax Credits caught the headlines when Chancellor George Osborne delivered his Autumn Budget statement, alongside a boost to building and good news for first time buyers.
The Chancellor announced the allocation of £4 trillion of public spending over the next four years, with an £8 billion reduction in borrowing now being forecast and a predicted surplus of £10 billion by 2019-20.
In a package of measures designed to help with housing, Mr Osborne announced a doubling of the housing budget to £2bn a year, to fund 400,000 new affordable homes by the end of the decade, to both buy and rent. Help to Buy has been extended with restrictions removed on shared ownership schemes, so more people can get on the housing ladder. There’s also a new Help to Buy equity loan scheme that will give London buyers 40% of the home value from early 2016, doubling the 20% offered under the current scheme.
But for second home owners and landlords looking to add buy to let properties to their portfolio, the Chancellor dealt another blow by announcing a massive 3% extra levy in stamp duty land tax on such purchases with effect from April 2016. The money raised will be used to fund investment in local communities. This follows on the heels of his last Budget when he announced that there would be a cut in tax relief on mortgage interest for landlords. Tax relief is set to be gradually restricted to the basic rate, currently 20%, where landlords had previously been able to offset mortgage interest against top rates of tax. The shift was to tackle what the Chancellor called an “unfair advantage” for landlords over homeowners.
Said tax law /private client expert Marc Dorsett of Gepp & Sons Solicitors : “Landlords have been in the Chancellor’s sights for some time, with high levels of buy to let pushing up house prices and reducing affordability for first time buyers. Buyers of second homes will also be caught by this new rate of stamp duty on their future purchases. With the policies he set out today, it’s likely to reduce some heat in the housing market, once the new stamp duty level kicks in.”
Marc added: “The other sting in the tail for landlords and others making capital gains is the shift towards faster digital taxation processes. Mr Osborne has ambitions to build one of the most digitally advanced tax systems in the world and one result of this will be faster collection of capital gains tax, which is payable on any gain made by a landlord or second home owner on a property when they sell up.”
The Chancellor also announced that people will no longer be able to get cash compensation for minor whiplash claims, in a crackdown designed to cut the number of fraudulent claims and likely to lead to reduced motor insurance premiums. Instead, such injuries are expected to go to the small claims court with the upper claims limit increased from £1,000 to £5,000.
Underused courts will also be closed, saving £700m which will be used towards the introduction of new technology into the court service.
This is not legal advice; it is intended to provide information of general interest about current legal issues.