Last week’s Spring Budget Statement centred around tax in Jeremy Hunt’s attempt to win back voter confidence. However, the announcements left the industry feeling deflated, as landlords and the value of the PRS were once again overlooked.
In last Wednesday’s Spring Budget Statement, Chancellor Jeremy Hunt laid out his economic plans for what’s likely to be the last time before the next General Election. Given the current opinion polls and by-election results, this Budget Statement could have been pivotal to winning back Conservative voter confidence. However, landlords and the property market were largely overlooked.
Below, we run through what should have been included in the Budget and where Hunt’s announcements leave landlords.
Ousting the landlord
Despite the essential role landlords play in housing tenants who would otherwise have nowhere to live, several of Hunt’s announcements show the Government attempting to deter landlord investment. The aim of this is to boost the housing supply for homeowners. However, other measures could have been implemented to better support the rental sector and the wider property market.
The Crackdown on Short-Term Lets
The UK holiday let industry is booming, providing high-quality properties for millions of domestic and international holiday-makers. In 2021, the short-term rental sector contributed £27.2 billion to the UK economy (1.4% of GDP) and provided just under 500,000 jobs (Oxford Economics).
Despite this, one of the key announcements was abolishing the Furnished Holiday Letting Tax Regime to deter short-term letting investment and boost rental market supply in tourist areas. However, with 5.7% of properties vacant in the South-West alone (with no indication that they’re being used as a short-term let), many industry experts believe that a crackdown on vacant properties would have been more impactful.
As it stands, there are 1.4 million vacant properties across the UK. These properties should be the Government's focus (these and meeting their own new housing targets), not the holiday lets that continue to drive local economies.
Stamp Duty Thresholds
The temporary £425,000 threshold for first-time buyers is set to revert to £300,000 in March 2025, and many had hoped Hunt would permanently change the threshold to the higher amount. This would support thousands of first-time buyers in getting onto the property ladder, especially in regions of the UK with higher average house prices.
Rightmove called for this to go one step further with an implementation of Regional Stamp Duty bands. Those in the North-East benefit most from the current threshold, with 91% of properties coming under the current 0% threshold, whereas just 16% of properties in London have a value below £425,000.
Despite this, the Chancellor abolished the Stamp Duty Relief for Multiple Dwellings, or “Granny Annex Tax”. While there is evidence that some people abused the scheme, abolishing it will not benefit thousands in the same way amending the tax thresholds could have.
Capital Gains Tax (CGT) Cuts
The drop in higher-rate CGT is a rare win for landlords. However, many industry experts have noted this to be a push to encourage landlords to sell properties and boost housing stock for homeowners. The reality is that a better way to increase the volume of purchase and sale transactions would have been to reduce the lower rate for basic taxpayers (currently 18%) as well.
The 4% saving should not incentivise landlords to leave the market but may help those looking to sell lower-yielding properties in their portfolios.
Affordable housing
Affordable housing, which should have been the top priority on the Chancellor’s list, was hardly mentioned. Allison Thomspon, the Managing Director at National Lettings, noted that the PRS is the only sector that is taxed without the ability to offset:
“The playing field needs to be levelled, urgently, to keep the required level of stock in the private sector”.
Furthermore, Michael Cool, CEO of LRG, noted, “Although there was some investment in new homes announced in this Budget, we would like more Government support to increase housing supply. We want to see more sustainable ways to support growth, such as looking at stamp duty reform and policies that are conducive to help increase supply, which is the underlying cause of lots of the issues we’re facing in the property industry.
“Let’s hope the election brings forward more housing policies that will help to support all tenures from social homes to renting privately and home ownership.”
The Commercial Market – VAT Cuts for Hospitality
Many commercial investors were left equally disappointed by the Statement after the Chancellor failed to announce any changes to VAT for the hospitality industry. Leading experts in the sector had urged for VAT to be cut from 20% to 12.5% to better support businesses that have been struggling since the pandemic.
Hunt did confirm an increase to the minimum threshold for firms to start paying VAT to rise from £85,000 in revenue to £90,000 from April 1st. However, industry leaders note this does not go far enough to support the majority of pubs and hospitality businesses.
Landlord Concerns
The aftermath of the Spring Budget Statement will leave many landlords considering their next steps for their property portfolios. To learn more about what was announced, read our full analysis of the Statement here.
If you would like to discuss your property finance plans with one of our expert mortgage makers, call us on 0345 345 6788 or submit an enquiry here.
If you have any questions on how the Spring Statement will impact your property investments or to discuss your property finance plans, contact our brokers on 0345 345 6788 or submit an enquiry here.
