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Categories: government and politics | tax
Chancellor of the Exchequer, Jeremy Hunt is being placed under pressure to cut business and personal taxes in the Autumn Budget, with either option offering good news to landlords.
Fiscal headroom, the excess cash held by the Treasury from tax revenues after repayment of debts, is expected to be higher than government estimates.
Most commonly, the Treasury can either decide to spend this by cutting taxes, or by designating it to public spending.
Government estimates put the fiscal headroom at £6.5 billion. However, an independent think-tank, Resolution Foundation, put estimates at £13 billion.
The Autumn Statement will be announced on 22nd November and there has been growing pressure from Tory MPs for Jeremy Hunt to cut business and personal taxes.
Tory back-bencher Sir John Redwood told the Daily Mail:
The Chancellor has got to target his tax cuts to have maximum effect to get inflation down, get growth going and get the deficit down.
These are all possible and compatible aims, and it is crucial he does them now. He cannot rely on Office for Budget Responsibility forecasts five years out, and the only thing we know about that forecast is it will be wrong.
Cutting business taxes and cutting taxes on people that directly affect inflation should be the two priorities of this Budget.
Ex-business secretary Sir Jacob Rees-Mogg urged the Chancellor to scrap inheritance tax altogether:
The Chancellor should do something bold like getting rid of death duties altogether, rather than tinkering that nobody will notice.
How would a cut to inheritance tax affect landlords?
As long as it is above the threshold, capital in any form is subject to Inheritance Tax, including property.
Landlords, more than anyone, are most likely hold a lot of their capital as equity in property.
According to the Institute of Fiscal Studies, the proportion of properties to be affected by inheritance tax was likely to rise from 5.5 percent this year, up to 7 percent a decade later in 2032-33.
Further to this, the threshold for inheritance tax (IHT) has been stagnant at £325,000 since 2009 and is expected to stay the same until at least 2028. If it had kept pace with inflation, it would have reached £495,551 by September 2023.
David Alexander, chief executive of estate agency DJ Alexander, said:
While many people believe that inheritance tax only affects the very wealthy the reality is that substantially more people are being drawn into paying the tax because of rising house prices.
A large number of people, who would not view themselves as wealthy, will find their relatives facing a large tax bill simply because they owned a property which rose in value over decades.
Corporation tax cuts benefit limited company landlords
If Corporation Tax is cut, the large numbers of landlords who have incorporated would benefit, perhaps driving more to consider this option.
Wrapping a property in a limited company has grown in popularity since ex-Chancellor Osborne scrapped the mortgage tax relief.
Limited companies have already been a cost-cutting method for many landlords, but if Jeremy Hunt decides to cut corporation tax, landlords with property in limited companies will be able to enjoy even greater profit margins.
Whether the Chancellor decides to cut inheritance tax or corporation tax, landlords will benefit in some way.
All eyes will be on the Autumn Statement on 22nd November to catch the developments and after a tough period for landlords, tax cuts would be very good news.
