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Self-employed, buy-to-let and the Budget




Self-employed, buy-to-let and the Budget

Housing was given scarcely a mention in the Budget - perhaps there was little need to do so, given the government's White Paper came out just a month before the chancellor gave his speech.

In the 106-page document, Fixing our Broken Housing Market, the Department for Communities and Local Government reiterated government pledges to put billions of pounds into boosting housebuilding in the UK.

The document outlined how the government would set about finding the land, building more homes - and quickly - as well as creating a diverse housing market in the UK.

In her prologue to the report, Prime Minister Theresa May said: "I want to fix this broken market so that housing is more affordable and people have the security they need to plan for the future. The starting point is to build more homes.

"This will slow the rise in housing costs so that more ordinary working families can afford to buy a home and it will also bring the cost of renting down."

So it was therefore no surprise that housing did not get a mention in the Budget speech or much space devoted to housing or property in the accompanying Budget documents (which was one of the shortest documents in the history of recent Budgets).

Stamp Duty

What was mentioned briefly was property taxation - but not stamp duty, which has doggedly remained at the scale below for residential purchases despite the fact it is nigh on impossible to find a property for 125,000 in London and the South East.

Given stamp duty land tax (SDLT) has been forecast by government to bring 17bn into the Exchequer's coffers, this is perhaps understandable.

Purchase price of property Rate of Stamp Duty Buy to Let/ Additional Home Rate (from April 2016) *
0 - 125,000 0% 3%
125,001 - 250,000 2% 5%
250,001 - 925,000 5% 8%
925,001 - 1.5m 10% 13%

Source: Money Advice Service

The buy-to-let market was also watching to see if the chancellor might let up on private landlords, but anyone hoping that Philip Hammond would relent and give the buy-to-let market a tax reprieve was also going to be disappointed.

Instead, Mr Hammond's silence on the matter indicated he was happy for George Osborne's crackdown on buy-to-let investors to remain in place.

In April 2016, the first of the chancellor's measures kicked in when the 3 per cent SDLT came into force.

As a result, many landlords moved to create limited company structures - special purpose vehicles (SPVs) - to mitigate the effect of the 3 per cent tax hike.

However, in a policy statement supporting the 2016 Budget, the then chancellor Mr Osborne confirmed those buying inside a limited company will still be hit by the surcharge - so both corporate and individual residential property purchases will be subject to the 3 per cent hike.

To add insult to injury, in this Spring Budget, Mr Hammond announced a dividend tax allowance cut from 5,000 to 2,000. 

This 3,000 allowance reduction has rubbed salt into the wound of buy-to-let investors, who can take income from the SPV either as dividends or as a salary - both of which have tax implications.

David Hollingworth, associate director, communications at London & Country Mortgages, comments: "Landlords using SPVs will find themselves affected by the dividend allowance cut.

"Dividends are one way of extracting income from the company but the dividend payment will now come with even lower tax breaks.

"There is no good news there for landlords who have used a company structure to protect themselves."

That said, the Budget did pledge to "delay the reduction in the filing and payment window" until 2018-19 - giving some measure of reprieve.


As if it had not become harder for entrepreneurs and the self-employed to get a mortgage, thanks to tough affordability criteria and the need from some lenders for three years' worth of proof of earnings, the additional tax burden proposed by the chancellor could make it harder for them to get on the housing ladder.

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