There could soon be a sharp rise in the number of buy-to-let looking to sell up as a consequence of the Chancellor Philip Hammond’s decision in the Autumn Budget of 2018 to abolish letting tax relief from April 2020, according to Andrew Turner, chief executive at Commercial Trust Limited.
The specialist buy-to-let broker believes that the new rules in particular, could impact on ‘accidental landlords’, those who once lived in a property and then decided to rent it out.
The sale of a former residence which has latterly been let out may be liable for capital gains tax (CGT) if the property is worth more at sale than when purchased.
Until April 2020, up to £40,000 of letting relief may apply. This relief, currently worth up to £11,200 of CGT savings, has the benefit of potentially reducing the amount CGT is charged on.
After April 2020, this lettings relief is being withdrawn, except to those who occupy the property with a tenant.
Turner said: “This is naturally a bitter pill to swallow– and could prompt those landlords affected, who had plans to sell in the next couple of years, to do so before the April 2020 deadline.
“The rules around CGT will also put a greater urgency on landlord payment of such liabilities from April 2020.
“At present, landlords who sell a rental property and make a capital gain, have until January 31st in the year after the tax year they made the sale, in which to pay their bill.
“So, for example, if an individual made a taxable capital gain from a property sale in May of 2018, they would not have to pay this tax liability until January 31st 2020.
“From April 2020, a CGT bill on the sale of a residential property, by a landlord, will have to be settled within 30 days of the completion of the disposal.”
However, with property price growth slowing down and prices even falling in some areas, Turner believes that other buy-to-let landlords may benefit from the opportunity to acquire properties already set up as rentals, from anyone looking to sell.
“For some, there may be more opportunity to buy,” he added.
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So some who are operating with too much debt may sell, but who will be buying , first time buyers, or landlords with cash in their pockets ? I suspect the latter .
This will be the end of the Accidental LL who lets through legal means.
Those who have let as a normal BTL will be better off selling up.
It would take a lifetime for rent profit to equal CG.
This is a sort of S24 for homeowners.
Bet they DON'T like it!
Well now they know what being a S24 LL feels like!!
Very few LL will be buying these properties which means even further reduced rental supply.
A LL are reckoned to house about 1 million tenants.
Where will these tenants live?
Rents will be increasing as well.
Being a tenant is going to cost a fortune and that is only if they can find somewhere.
I predict sealed bids for rental properties such will be the lack of suitable supply.
Me I'm jacking up my rents to make the tenants pay for all the bonkers additional costs being imposed on me.
So far no lack of tenant demand............no surprise to me!!
I predict what will happen amongst Accidental LL is that they will revert to a lodger strategy so that where possible they maintain their PPR status if having to rent elsewhere.
No way will Big Brother Connect be able to detect homeowners letting to lodgers.
There will be a drastic reduction in tax take because no homeowner will ever declare lodger income in excess of the RFR A of £7500 no matter how much lodger income is actually received by the A LL which will ALWAYS be in undetectable CASH!
So the Treasury will see a reduction in tax paid on what up til now has been tenant income.
Again the stupid Chancellor is effectively going to destroy a part of his current tax base.
Tax on rents of over 1 million tenants is surely quite significant.
Again we have another idiotic Chancellor who has no comprehension of what the effects will be as a result of this CGT policy.
It is obvious that those A LL will sell up if they have significant CG.
Only a fool would retain a property which if then sold after the 2020 date would then incur potentially substantially higher CGT.
It is clear that the overwhelming imperative is for such A LL to sell up.
It will end in tears any 40% tax payer with 1-2 properties(75% of PRS) will sell to avoid the loss making S24 taxation. We'll definitely see a 1million PRS reduction from the original 4.5million, maybe more....but where will these million families go? They can't afford to buy, that's why they rent....
Homelessness will rise significantly, council temporary accommodation will sky rocket, at £50 a night (£1,500 a month) far greater than an average £800 a month rent...
The smart money may be a shift into temporary accommodation rented to councils at higher fees....
Minimum 25% reduction in PRS and regulations will push up rents by 10-20% in a few short years....
It's not rocket science, but boy, it apparently hasn't been thought through by a poor chancellor!
Unfortunately as an Accidental Landlord with great reliable tenants and a 4% return I am being forced to give them their notice and sell up, the apartment was once my main home and after moving in with my partner several years later and letting the flat I am being forced to sell, no more income tax receipts for my letting for the govt, and the tenants will be devastated as they want to stay. Loosing lettings relief and previous principal main residence relief for the years I lived there will put more tenants desperately seeking high quality accommodation, if anyone can advise the best way to sell now to Landlords looking for good quality apartment with very good tenant please advise as going to a normal high street agent and hoping for a sale with the prospect of a vacant property now isn’t very attractive , any advise appreciated.
I have sold properties with tenants and without tenants, a "good" agent should be able to deal with both, Commissions between .75% and 1%.
Surely there will be a queue of FTB as apparently evil mortgaged sole trader LL have been preventing FTB from buying even though there are many thousands of properties for sale.
Don't know why Corporate LL also haven't been accused of preventing FTB from buying but for some reason S24 doesn't apply to them.
Why then are these properties for sale not being snapped up by FTB!?
It is almost as though the various Chancellors have been talking complete and utter b######s!!
This means S24 is a completely political policy and has nothing to do with the FTB inability to buy properties.
There must be other issues that are causing FTB not to buy.................now what could they be?
Lack of supply is certainly not one of them.
Which means the whole alleged premise of S24 is a fraudulent one.
Politicians telling lies............surely NOT!!!??
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