Budget: Will it hurt or help the private rental sector?

A leading PropTech expert says the lettings industry hopes next week’s Budget will provide clarity on taxes - but he’s also warning that renting could be targeted to fill fiscal black holes caused by the pandemic.

Neil Cobbold, chief sales officer at automated payment service PayProp, says there are three key areas where clarity - or pain - could be provided by Chancellor Rishi Sunak on March 3.

1. Stamp Duty: The Budget will presumably make clear once and for all whether there is to be an extension of any kind for the current duty holiday set to end on March 31 - an extension has been backed by some 150,000 signatures to an online petition.

"A short extension could help investors with transactions already in the pipeline to benefit from a significantly lower tax bill” says Cobbold. “However, merely moving the cliff-edge back by six weeks means thousands of purchasers could still miss out. Understandably, the Treasury will be keen to return the previous stamp duty threshold to raise revenue to fill the spending gap created by the pandemic, but reimposing the full rate of tax would discourage sales."

He says one silver lining to the current timetable is that while some investors may miss out on a stamp duty exemption, they may face less competition for properties because a new two per cent SDLT surcharge for non-resident overseas property purchasers kicks in on the same day.

2. Capital Gains Tax: "Increasing CGT rates is seen as an easy way for the government to increase revenue as it’s a tax paid by relatively few people. However, it affects landlords selling properties and would have a more pronounced impact on our sector than many others" Cobbold warns.

The spectre has been raised by a report published by the Office for Tax Simplification late last year which suggested higher CGT rates could net the Treasury an additional £14 billion annually. 

Cobbold goes on to say: “If changes to CGT are introduced, the government must take into account the additional burden that could place on the rental market, including the potential to discourage investment and reduce the supply of available housing. There were also significant changes to the CGT system introduced in April last year, so it remains an issue all landlords will be considering carefully when deciding the future of their portfolios.”

3. Possible Rent Grants for tenants: Similar measures have been introduced in Scotland and Wales and trade bodies Propertymark and the National Residential Landlords Association - plus charities Shelter and Citizens Advice - want them in England too.

"If it isn’t extended again, the end of the furlough scheme in April could cause rent arrears to worsen, impacting landlords' finances and letting agencies' management fees" cautions Cobbold.

“Throughout the pandemic, letting agents have helped landlords to manage arrears effectively by communicating with tenants and organising affordable repayment plans, but direct support from the government could ease the pressure on all parties and reduce the need for evictions once the ban is lifted.”