Budget 2016 – what landlords need to know

After last week's budget, it seems private landlords are still in the firing line. Here's our round-up of some of the key points:

Capital gains tax

One of the things eliciting most grumbles from landlords wasn't actually a tax rise at all, but rather what many see as an unfair cut. There was a hefty drop in capital gains tax, but unfortunately private landlords were deliberately excluded from this.

The cut meant that tax paid on investment gains was reduced from 18% to 10% for basic rate taxpayers, and from 28% to 20% for higher rate taxpayers. Not included in this reduction, however, were sales of residential property, so landlords will be stuck with the old rate, meaning they'll be paying 8% more on capital growth than people who've invested in other things.

Stamp duty

There were some clarifications around the increase to stamp duty (a surcharge of 3% on second home purchases), which was announced last year. This charge was particularly unpopular with buy-to-let landlords, and many have ben rushing to get their property purchases locked down before the change takes effect on 1 April 2016.

Originally, there was a proposal that investors owning 15 or more properties were to be excluded from the extra stamp duty charges, but this exemption has been rejected. The concession was initially conceived as an effort to encourage growth in UK housing stock, but the Government has since decided that this would be open to exploitation from smaller landlords banding together to form limited companies, and that there are enough incentives for developers.

There were also changes to the way stamp duty is calculated on freehold commercial property. The new rates will be 0% for the portion of the transaction value up to £150,000; 2% between £150,001 and £250,000, and 5% above £250,000. The Government says that 'buyers of commercial property worth up to £1.05 million will pay less in stamp duty'.


As a reminder, the new system for claiming expenses from rental income will apply from April 2016. This was announced last year, and means in essence that you can only deduct actual costs for replacing furnishings each year, rather than having a set annual allowance for wear and tear.

What’s the outlook for landlords?

All this is on top of last year's significant changes to mortgage interest relief (gradually being phased in between now and 2020), which are likely to leave many private landlords substantially worse off. They now face a surcharge when they want to buy property, and what amounts to a penalty if they want to sell it.

It seems clear that the chancellor hopes to empower first-time buyers by limiting the appeal of turning a profit from UK housing. Some commentators are warning that this could prompt a mass sell-off as buy-to-let no longer becomes financially viable for many people, but what no-one seems to be able to agree on is whether this would be a good or a bad thing for the UK in general. Some, including the Government, think a glut of available housing would depress prices and give first-time buyers a boost (especially given the introduction of the new Lifetime ISA), while others reckon it would have a negative impact on the rental market, leading to a shortage of rental properties and an increase in rents as landlords try to recoup their costs.

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