Chancellor George Osborne’s Budget 2015 is set to revolutionise property letting by allowing tenants to share their homes without gaining permission from landlords or freeholders.
The measure opens the way for millions of tenants to take in lodgers as part of the government’s new ‘sharing economy’ policy.
The policy is aimed at boosting business and saving costs by allowing individuals and businesses to make better use of their assets.
One asset they want more people to share is a private rented home.
The new measure announced by Osborne will let tenants and leaseholders sub-let their homes without the permission of superior landlords or freeholders.
A new law will nullify any clause in a fixed term tenancy agreement or statutory periodic tenancy that demands a tenant obtains written permission to sub-let.
Budget documents only outlined the proposal – the flesh on the bones is likely to come later in a consultation document.
A fixed-term tenancy agreement typically runs for six or 12 months. If the tenant stays in a home once the agreement expires, the tenancy becomes a periodic tenancy without a time limit.
Earn more before paying tax
Some subtle changes in income tax allowances and earnings thresholds will put a few pounds back into the pockets of landlords.
From April 6, 2016, the personal allowance is £10,800, increasing to £11,000 in April 2017.
The higher rate tax (40%) threshold also changes on April 6, 2015 from £41,865 to £42,385, rising to £42,700 on April 6, 2016 and up to £43,300 on April 6, 2017.
For the 2016-17 tax year, a landlord earning £42,385 will pay £6,117 basic rate tax. Any earnings over the threshold will be charged at 40% up to £100,000. Above this amount, taxpayers lose their personal allowance on a sliding scale and start paying top rate tax at 45% when earning £150,000.
Capital Gains Tax
Capital gains tax (CGT) is unchanged for UK resident taxpayers – expats selling homes in the UK, the rules change pay CGT on any gains in property values from April 6, 2015.
For disposals before that date, expats paid no CGT, but will pay the tax on any disposals after that date.
However, CGT will only be charged on gains from April 6, 2016.
Landlord Energy Saving Allowance (LESA)
This tax relief that allows landlords to spend up to £1,500 on energy saving improvements to each rented home in a tax year was due for renewal on April 6, 2016.
However, the Chancellor has not announced LESA will continue, so the relief disappears after the end of this tax year.