On Thursday, Chancellor George Osborne will announce a new range of tax measures in his Autumn Statement. With so much focus on PRS we are bound to see some shift in the arrangements. One reported change will target wealthy foreign investors by making non-UK residents pay capital gains tax (CGT) when they sell a UK property. This seems to be the only likely alteration. Reports suggest Mr Osborne will not address the issues of the “wear and tear” allowance or capital gains relief for landlords who previously used a rental property as their main residence. Hopefully this will be the case; much more debate is required on these subjects in the wake of the Intergenerational Foundation’s report.
Rentify would welcome having non-UK residents pay CGT. It is fair that all potential buy to let investors are faced with the same level, especially since demand is healthy in the areas most likely to be affected. It may be a small step but it’s one in the right direction. It should also be noted that the measure will affect former UK residents who have emigrated for work and are letting out their UK property: they’ll now be faced with CGT if and when they choose to sell. This may be a slightly less desirable outcome as it will disincentivize emigration from the UK when it could use a boost.
If the Chancellor does choose to cut allowances for wear and tear and changes CGT rules for rentals previously used as a main residence, PRS would face a problem. These allowances are not enabling landlords to make huge profits (average net yield is hovering around 5%) and their alteration could cause real damage. Certainly there is a conversation to be had, but it has not happened yet. Hopefully, as seems likely, the government is aware of the need to help PRS at this time: with 20% of private tenants on housing benefits, it’s clear that it has a huge role to play in supporting social housing.
Finally, the Association of Residential Letting Agents (ARLA) has called for allowances to encourage landlords to improve their properties through a suspension of VAT on materials or capital allowances for home improvement. They have also called for the licensing of letting agents, which would be an important step in eliminating rogue agents. Whether the Chancellor will heed these calls remains to be seen on Thursday.