The Autumn Budget 2023 brings a series of changes that landlords in the UK should be aware of. Here’s a concise breakdown of how these developments may impact your property investments.
1. National Insurance Cuts
The government has introduced national insurance cuts benefiting around two million self-employed individuals in the UK. For landlords with larger portfolios (as indicated by the 2021 English Private Landlord survey), the impact will likely be more noticeable.
The cuts involve scrapping class 2 national insurance for self-employed individuals earning over £12,570 annually. This means affected self-employed people won’t have to pay the current mandatory £3.45 weekly charge, saving approximately £192 per year.
Additionally, those paying class 4 national insurance will now contribute 8% (instead of 9%) on all earnings. Combined, these changes can result in savings of up to £350 for self-employed landlords.
2. Tax free allowance
The chancellor, in last year’s Autumn Statement, announced a significant reduction in the capital gains tax-free allowance. Starting from April 2023, the tax-free allowance decreased from £12,300 to £6,000, with an additional reduction scheduled for April 2024.
Consequently, the capital gains tax-free allowance will be halved once again to £3,000 in April 2024. This decision means that when one in four landlords sells their property in the next year, a greater portion of their profits will be subject to taxation.
3. Boost to Affordable Housing Initiatives
The government’s continued commitment to affordable housing initiatives is evident in the Autumn Budget. Landlords engaging in the provision of affordable homes may find increased support, such as funding incentives and streamlined regulatory processes. Understanding the specifics of these initiatives can open avenues for landlords to contribute to community development while capitalising on associated benefits.
The government has committed to spending more money on building new homes and relaxing planning rules. The Chancellor outlined plans to invest £110 million into “nutrient mitigation schemes”, which could lead to the building of 40,000 more homes.
4. Renting and Property Standards
There was emphasis on the importance of ensuring high-quality housing standards for tenants. Landlords are encouraged to invest in maintaining safe and habitable rental properties. Compliance with the latest housing regulations is crucial, as non-compliance may result in penalties. Staying informed about these standards is key to providing tenants with a satisfactory living experience while avoiding potential legal consequences.
5. No Changes To Current Stamp Duty
The speculation surrounding potential alterations to stamp duty, including an elevated threshold and increased support for first-time buyers, has been addressed by the chancellor. The decision has been made to maintain the existing thresholds until March 2025. Under these rates, property buyers incur no tax on the initial £250,000 of their purchase. However, landlords and those purchasing second homes still face an additional three percent in stamp duty. Given the elevated stamp duty rates and escalating mortgage expenses, it comes as no surprise that merely three percent of landlords plan to acquire a property in the upcoming year.
6. Support for First-Time Buyers
For landlords contemplating property sales, the Autumn Budget unveils support for first-time buyers. The government aims to make homeownership more accessible for this demographic, potentially influencing property demand and market dynamics. Landlords navigating the market should consider these shifts and their implications for property transactions.
7. Support for low-income tenants
Addressing a critical concern where rent constitutes over half of the living expenses for tenants with lower incomes, the Treasury has committed to boosting the Local Housing Allowance (LHA). This initiative aims to extend LHA coverage to the lowest 30 percent of rents nationwide, offering essential assistance for residents to retain their residences. The projected outcome of this increase is anticipated to benefit around 1.6 million households, providing an average additional support of £800 per household in the upcoming year.
