So who wins and who loses from the emergency budget?
Well, the trouble with the budget is that lots of the details are in the hard-to-get (and even harder to digest) documents that come out after the Chancellor has sat down.)
Knowing this, I decided to watch the ladies playing tennis at Wimbledon on Beeb One instead. (I even saw a British lady winning – which is about as rare as watching LibDems cheer on harsh budget cuts, methinks.)
But back at the desk and catching up, it seems clear that the winners could be the private tenant who is not in receipt of Local Housing Allowance / Housing Benefits.
Why? Well, because Osborne has placed limits on the amounts that can be paid under Housing Benefits at £400pw for a 4 bed house and £280pw for a one bed one.
This will mean that landlords who previously let to LHA tenants – (because it paid rather well for those landlords who knew what they were doing and could work their way around all the hideous forms) – could now switch out to letting to private tenants, thus increasingly supply here and cutting the level of private rents.
But where are the LHA dependent tenants (who are currently getting more) going to go? Does this apply to new claims? I’m still hunting down the details on this as I write.
Impact will be most felt in London and the South East.
This move is likely to impact London and the SE the most, because rents are higher here. Here it is likely to push LHA recipients out of the more expensive areas (of London and some other parts of the SE) into areas where they can more comfortably still get a let property at below these new levels.
Some people (those inclined to the right politically) would say this is only fair – why should the taxpayer pay full whack for benefit dependent people to live in up market areas which are out of reach to many ordinary taxpaying mortals. Others may see this as ghettoisation.
Capital Gains Tax:
The other bit of news was that CGT will rise to 28% but only for higher rate taxpayers. So, it looks like if you are thinking of selling a property or any other asset, you’ll just need to avoid income for a year to make sure you are a lower rate taxpayer. Surely, though it won’t be that simple, will it?
LettingFocus.com is the home of Landlord Information. I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years. Services to Businesses and the Public Sector Primarily I am a consultant to banks, local authorities, social housing providers, insurers and other organisations – helping them with their landlord facing or buy-to-let product strategies and services.
I hope this limit on the won’t be pro rata throughout the country, I presume it will only affect London and Southeast etc.
Comment by curtis moyle — 23/6/2010 #
Reports are that LHA will likely be set between 30 and 60 percent of average market rent in each area. In my city that means LHA for one bedroom which is currently £500 pcm would be set at £150 to £300 pcm – this a potential catastrophe for landlords with DSS tenants! – Budget report
Comment by Mel — 23/6/2010 #
Osborne didn’t reintroduce taper relief or indexation. Meaning part of CGT paid on assets held long term such as property will be a tax on inflation. The reason he gave was ‘It’s too complicated to work out taper relief or indexation’. 5 minutes of junior school maths is all it takes but that’s too much ! How convenient for him.
Comment by Pobinr — 24/6/2010 #
Just to expand on my piece, and comment on the change to setting LHA at the 30th percentile.
I think setting LHA at the 30th percentile could work because by setting LHA at median rent (as now) the LHA level does in effect become the defacto market rent (certainly in areas where LHA dependency is high), thus acting to drive up all rents.
The budget changes to housing benefits are likely to impact London and the SE the most, because rents are higher here.
Here it is likely to push LHA recipients out of the very expensive areas into areas where they can hopefully still get a let property at below these new levels.
A lot of people (and most of those inclined to the right politically) would say this is only fair – why should the taxpayer pay full whack for benefit dependent people to live in very up market areas which are out of reach to many ordinary taxpaying mortals who have to slum it in more downmarket locales.
So, the large family one of the tabloids found who were supposedly getting £100K a year may once again have to pack their bags and look for new accommodation.
Others may see this as ghettoisation and I see one council housing executive has already said that she expects to see a wave of LHA dependent tenants flocking into her slightly more downmarket and cheaper London borough from the posher and more expensive to rent boroughs nearby.
Also, it now seems that the new rent settings will apply to all existing LHA claims too.
This could all have quite an impact.
Just to correct one item in my piece, the rate for one beds will be set at a maximum of £250 not £280pw.
David Lawrenson
Topic Expert
http://www.LettingFocus.com
Comment by David Lawrenson — 24/6/2010 #
LHA rates wont be 30 to 60 percent of what they are now. rates will be set from the average bottom 30 percent of the market
Comment by curtis moyle — 1/7/2010 #