How will the 2018 Budget affect you?

Posted on 14 November 2018 by Robyn

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Chancellor Phillip Hammond recently delivered his 2018 Autumn Budget on Monday 29th October, the last before Brexit. There were a lot of new changes that probably won’t affect you all that much. And some that will. We’ve picked out the main points, so you know exactly which changes benefit you and which could cause problems.   

If you’re a wage-earner looking at loans

Your disposable income will increase
The chancellor raised personal allowance and higher rate income tax thresholds. People currently start paying tax on income upwards of £11,850 per year. The threshold will rise to £12,500 in April 2019, so an average earner will save £130 annually (excl. National Insurance). Meanwhile, those on the higher rate threshold currently start paying 40% tax on income above £46,350. This threshold will rise to £50,000. Someone earning £50,000 will then save £860 per year (excl. National Insurance).

A reduction in tax is always welcomed by the British public, but it may prove particularly valuable to homeowners. If lenders update the background assumptions on their affordability calculators in anticipation of the Budget implementation in April, then these increases in disposable income should boost mortgage affordability for a lot of wage-earners. Some may also be able to borrow a little more money for those all-important home renovations or even to purchase a better property.

If you’re a first-time buyer

You have until 2023 to apply for the Help to Buy Equity Loan
It’s mainly good news for first-time home buyers! While the Help to Buy Equity Loan scheme has received some criticism, it’s recently proven beneficial to many first-time buyers. The Help to Buy Equity Loan is essentially the government’s way of tackling the debilitating deposit issue that’s a major limiting factor for first-time buyers. Essentially, the government lends you up to 20% of the cost of your property, or 40% if you’re buying in London. First-time buyers should then only need to provide 5% of a 25% deposit.

You’ll be exempt from Stamp Duty on shared ownership properties up to £500,000
Currently, all first-time home buyers are exempt from stamp duty on homes worth up to £300,000. The new rules will abolish Stamp Duty for first-time buyers of shared ownership properties with a market value of up to £500,000. You’ll also benefit if you purchased your shared ownership property within the last year, as the new legislation will be applied retrospectively from the 2017 budget.

If you’re a buy-to-let landlord

You may not qualify for Private Residence Relief
Landlords are, once again, certainly bearing the brunt of the 2018 Budget. The Private Residence Relief period will be reduced from 18 months to 9 months in April 2019. This means that landlords who’ve been living away from their property for over 9 months before its sale will have to pay capital gains tax for that time.

You may not qualify for Lettings Relief
Beloved by landlords, Lettings Relief often reduces the tax you’re liable to pay when you sell a property you’ve been letting. The 2018 Budget will see harsher conditions. Landlords will only be eligible for lettings relief if they’re still living in the property at the time of its sale.

If you’re buying from abroad

You’ll face a Stamp Duty surcharge of 1-3% on properties in England and Northern Ireland
Foreign buyers who don’t currently live in the UK will have additional fees to think about when purchasing property. While this isn’t ideal for everyone, it’s for a terrific cause. The extra stamp duty will go towards tackling homelessness in the UK.

And as for the UK housing crisis. . .

£500 million to the Housing Infrastructure Fund should see 650,000 more homes
The idea behind this new legislation is that local councils can apply to the Housing Infrastructure Fund for money to build infrastructure, roads and power supplies for new housing. Poor communications between new developments and towns is an ongoing criticism of these projects. An increase in infrastructure could boost property values and help these transport link issues.

£653 million to partnerships with 9 housing associations should deliver 13,000 homes across England
More homes in England should not only encourage new buyers but provide people with more options that suit their budgets.

More money for neighbourhoods to allocate land for housing to be sold at a discount
People will be able to buy local areas of land at discounted rates. This could lead to an increase in further property developments and self-build projects. What’s more, if they’re individual designs then the common criticism that all large, new build developments look similar/identical may be alleviated a little by locals near these new (self-build) developments.

£1 billion bank guarantees for small homebuilders
The funding should encourage SMEs to build more houses, rather than the property giants who have profited well from Help to Buy. Hopefully we’ll see more local builds and more options for homebuyers.

Visit Ray Boulger’s post for his initial thoughts on the 2018 Budget.

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