Buy-to-let landlords and housing associations have been dealt a double blow by Chancellor George Osborne as he delivered his first Budget of the new parliament.
Tax relief for second mortgages is set to be abolished, significantly reducing the attractiveness of second home ownership for private investors who previously have been able to offset the costs of rented properties against their income tax bills.
The move was described by Council of Mortgage Lenders director general Paul Smee as “radical”, while the RICS’ head of policy Jeremy Blackburn said it would take “some of the heat out of the market”.
Deloitte Real Estate tax partner Phil Nicklin said the changes would “almost double the effective cost of borrowing for a taxpayer on the highest rate of tax”.
An equally significant blow was dealt to social housing providers, as the Chancellor announced they would be forced to cut rents by 1% per year over the parliament.
The move was part of a package of measures designed to find £12bn of savings in the welfare bill but will likely effect the number of social houses registered providers are able to deliver, coming at the same time as the plans to extend the right to buy beyond council housing.
A series of announcements were also made on devolution, including the creation of a land commission for Manchester as part of the latest deal signed by council leaders in the region with the government.
The chancellor also confirmed a county devolution deal for Cornwall and said he was in talks with other city regions including Liverpool, Leeds and Sheffield about similar deals to that in Manchester.
However there was no update on permitted development rights as had been expected, and little on perennial property bugbear business rates beyond the publication of responses to the government’s consultation on rates avoidance which included the revelation by the LGA that it costs the taxpayer £230m.
A series of wider tax measures have also been announced which could have a significant knock on effect. These included:
• A clampdown on non-doms, including the removal of tax relief on inheritance tax on residential properties
The Budget documents published by the Treasury also revealed plans for a new shadow chair of the public sector estate to help drive efficieny, and a new body to promote the sale of Network Rail-owned land
Finally, the Office for Budget Responsibility published its latest growth forecasts, marginally upgrading future growth later in the decade.
Click here to read the Budget document in full.
