Chancellor, Rishi Sunak, did not lose sight of the Conservatives’ objectives in Government during his announcement of the new UK budget – the first since October 2018.
Whilst much of his announcement was focused on efforts to mitigate the COVID-19 crisis, a number of commitments have been made to help ‘level up’ infrastructure and investment across the country.
In short, the key announcements relating to landlords and tenants were:
- 2% Stamp Duty surcharge on landlords not based in Britain
- £9.5 billion additional funds for the Affordable Homes Programme. This brings the total to £12.2 billion. These funds are for building affordable homes across England.
- £5.2 billion allocated for flood defences
- The Building Safety fund will receive £1bn to tackle all forms of unsafe high-rise cladding
Business Expenses
From the 6th April, all private landlords (including Members of Partnerships and LLP’s) will be unable to class any of their finance costs as a business expense – this goes for both interest and arrangement fees. As an alternative, they will receive a tax credit of just 20% of their finance costs in order to decrease their tax bill.
Stamp Duty increase for overseas home buyers
Due to exchange rates, overseas landlords have been able to buy more property for their money in recent years. Because of this, it has been an attractive – and financially rewarding – exercise for them to invest their money in British property.
But now, the Government will be introducing a new 2% surcharge on stamp duty, which will apply to all buyers of homes in England and Northern Ireland who are resident outside the country, regardless of nationality.
As an example, if a non-UK resident were to buy a £1.5m property in the UK before the changes – they could expect to pay £138,750 in stamp duty — including the 3 per cent premium that has been placed on all second homes since 2016. Under the new rules, that will rise to £168,750.
The hike will take force from April 1, 2021, where the funds generated will be used to end rough sleeping and buy up to 6,000 new places for people to live.
Mary-Anne Bowring, of property consultancy group Ringley, explained: “The falling pound has made housing more affordable to overseas buyers, while domestic buyers have had to contend with stagnant wage growth and ultra-low interest rates pushing up prices and eating away at their ability to save.”
Funding for flood defences
Landlords affected by flooding will welcome the Chancellor’s announcement on record funding of £5.2 billion for flood defences between 2021 and 2027.
These flood defences are aimed at offering better protection from flooding for 336,000 homes and non-residential properties across the country. The Treasury said every region would benefit from the investment and the North East and North West of England would receive the highest level of funding per property at risk of flooding.
Mr Sunak said: “Communities up and down Britain have been hit hard by the floods this winter, so it is right that we invest to protect towns, families, and homes across the UK.”
More homes on brownfield sites
In response to being able to build more homes, the Chancellor announced a £400 million fund for ‘ambitious’ Mayoral Combined Authorities and local areas to establish housing on brownfield land across the country, acknowledging that land availability is the ‘most significant barrier to building more houses’.
These are homes that landlords may consider adding to their portfolios.
Lee Pickett, of legal firm DWF, said: “The government has indicated a willingness to invest heavily in housing and the infrastructure required to unlock housing development.”
The government has said 300,000 new homes need to be built across the UK every year to keep up with demand, but delivery is running at the rate of just 180,000 a year, with opposition from local groups and campaigners to construction in the countryside remaining a significant block.
