The Westminster rumour mill is rife with speculation that the Chancellor of the Exchequer, Philip Hammond, will offer a concession to landlords in the form of tax breaks for those agreeing to longer tenancies.
In a recent Sunday Times, article claims were put forward that the Budget on the 29th October will contain tax breaks for those landlords with tenants of 3 years or more
The Housing Minister had been conducting a consultation on what proved to be an unpopular proposal to make 3-year tenancies mandatory in England.
Under the proposals - which are favoured by Downing Street - landlords would not be required to pay capital gains tax (CGT) if they sell their property to a tenant who has lived in a property for three or more years.
The plan is geared towards assisting those landlords who feel ‘trapped’ in the cycle of letting their property out and to assist a new generation of homeowners to get a onto the property ladder.
Under existing rules, landlords who sell a rental property are liable to pay CGT at 28% on the profits of their property sale.
The proposals were introduced to political debate by the conservative think tank Onward. Under Onward’s plan, landlords would be eligible on tax relief with the profit on a property sale split evenly with the tenant who could then use it as part of their mortgage deposit.
The think tank argues the average capital gain per property is £15,000. This means landlord and their tenants would each get £7,500. In London, it’s estimated the landlords and their tenants could receive as much as £19,500.
Will Tanner, Director of Onward, said: “It is time for Ministers to give private renters the chance to make their house a home, just as a Conservative Government gave a previous generation of council tenants the Right to Buy their home years ago.”
The Onward report follows on from a recent submission by the Residential Landlord Association which argued landlords should be offered tax relief on rental income which would become more favourable for each year the tenancy continues, up to 5 years.
The Government’s refocus on resolving the failing housing market follows the intervention of the former-Foreign Minister and Conservative Party leadership rival Boris Johnson’s intervention over the summer.
Johnson stated that the housing market was “broken” because under-supply had made homes unaffordable.
He has made housing part of his central message, saying: “the biggest and most urgent crisis we face” arguing the country should return once more become “the great home-owning democracy.”
The government’s own conclusions during the exploratory consultation on 3-year tenancies confirmed their belief that the introduction of mandatory 3-year tenancies would take much longer than offering financial incentives.
As of yet, there has been no formal announcement and this proposal may not make it into the new Budget at the end of October, however, the proposals represent an option to increase the length of tenancies without alienating core party stakeholders whilst encouraging more sales to first-time buyers.