Chancellor Phillip Hammond restrained from tinkering with landlord tax too much in his Budget 2018.
The major changes impact on the capital gains tax reliefs available to buy to let landlords when they sell a property that they had lived in as their main home for some of the time of ownership.
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Capital Gains Tax
The annual exempt amount rises from £11,700 to £12,000 from April 6, 2019.
An individual taxpayer will not pay CGT on the first £12,000 of a gain – and the rate remains at 18% for basic rate taxpayers and 28% for those paying higher rate income tax.
Husband and wife landlords can sell a buy to let home they jointly own 50:50 and benefit from no CGT on the first £24,000 of a gain, and providing they are basic rate taxpayers, the balance is taxed at 18%.
Principle Residence Relief
From April 2020, the 18-month rule shortens to nine months – meaning anyone who has lived in the letting home that they are selling can add nine months to the time they occupied the property as their main home there to reduce Capital Gains Tax.
For example, a landlord lived in a flat for 60 months as his main home, then let the property for 48 months while living elsewhere. Under current rules, 78 months of the 108 months of ownership is exempt from CGT.
From April 2020, this exempt amount reduces to 69 months.
Lettings Relief
Lettings relief is available to landlords who have lived in the property they are selling, along with principle residence relief.
Lettings relief is worth £40,000 to each owner – doubling to £80,000 for a husband and wife.
From April 2020, the relief is only available to a landlord who shares a home with a tenant.
Income Tax
Personal allowance increases from £11,850 to £12,500 from April 6, 2019.
The higher rate threshold goes up from £46,350 to £50,000 on the same date.
This lets an individual earn up to £12,500 a year without paying income tax and does not put them in the higher rate tax bracket until they earn £50,000.
From 2021 onwards, increases will be applied in line with CPI inflation.
Annual Investment Allowance
The Annual Investment Allowance for capital spending by businesses rises from £200,000 a year to £1 million for two years from January 2019. The increase applies to any business, including companies.
