Following Rishi Sunak’s statement, here is our headline summary of the latest announcements from the Government that could affect you as a would-be buyer, a homeowner, a landlord and/or a property investor:
Stamp Duty Land Tax (SDLT)
This government has clearly recognised the economic multiplier that’s delivered not only by new homes, but also by the second home movers market. To avoid the risk of existing chains collapsing through movers missing out on the SDLT holiday, in England, it’s being extended for all purchases up to £500,000 until 30th June. That takes the pressure off existing movers and also encourages new purchases that have almost four months to benefit from the measure.
In a surprise additional move, the first £250,000 of property purchases will continue to be free of SDTL up until 30th September 2021.
Kevin Shaw, Group Managing Director of Residential Sales at LRG, says: “The Stamp Duty Holiday extension is positive news for both the property sector and the wider economy. In the past year it has been a crucial boost for the UK economy, and the ongoing momentum will certainly help to increase public confidence in the post-COVID recovery”.
At the moment, the post-lockdown property market is set to be stronger than initial forecasts have suggested and we are seeing high buyer demand. The Stamp Duty Holiday extension will further help with this, enabling buyers that didn't get their purchase through in time to still take advantage of the reduction in Duty. While there is still the opportunity for buyers to move and take advantage of the reduction, it's important that anyone looking to sell starts the process now to have any hope of meeting the new deadline.”
This is great support for anyone buying and selling between now and the end of September, including those buying additional homes in England.
Mortgage Guarantee Scheme
When the moving market opened back up in May 2020 following the initial pandemic lockdown, many people who had saved a 5% deposit were let down when lenders withdrew 95% and even 90% loans from the market, mainly due to a fear that prices would fall.
Now, this revised initiative which was introduced following the last recession and closed in 2016, means the Government will provide a guarantee to lenders that they won’t lose money with 95% LTVs, even if market values fall. That allows those with a 5% deposit to buy a home – provided, of course, that their income supports the lending required.
Many major lenders have already agreed to support the scheme. This will no doubt help those who couldn’t buy last year to get on the ladder in 2021 and will continue to support transactions in the sector.
Furlough Scheme / Universal Credit
This will be extended until the end of September, with no change to the terms until the scheme ends. This will help any tenants (and landlords) or those owning a home to continue to pay their bills.
The self-employed grant scheme will also continue and a further 600,000 individuals could now be eligible, as long as they have submitted their latest tax return.
The uplift of £20 a week for Universal Credit has been extended for six months, helping those who own a home or are in the private rented sector continue to pay their rent and bills.
Economic support for individual areas
There were some announcements about additional support to help drive economic growth – which could possibly impact prices and rents and is therefore particularly useful for landlords and investors.
For example, in Leeds there will be a new UK infrastructure bank to help drive public/private investment projects. Darlington is to benefit from a new economic campus and there is over £1bn investment available for towns to apply for to improve their areas.
Teeside and Humber are to benefit from offshore wind and port infrastructure and become ‘free ports’, along with East Midlands Airport, Felixstowe and Harwich, Liverpool City Region, Plymouth, Solent and Thames. These ‘freeports’ are expected to drive economic growth and jobs, helping to support the housing markets in the local areas.
Although not directly related to property, there were also some announcements on the personal allowance, income tax thresholds, capital gains tax and, for those running companies, corporation tax.
In normal times, personal allowances and income tax thresholds are regularly adjusted. However, due to the need to pay back some of the money borrowed over the past year, the Chancellor has laid out his expectations of changes through to April 2026, including:
Capital Gains Tax
Rishi Sunak announced that there will be no changes to CGT allowances, inheritance tax or the lifetime pension allowance.
Michael Cook, National Lettings Managing Director at LRG, says: “The announcement regarding the Capital Gains Tax (CGT) is great news for the property sector, for both tenants and their landlords that play a key role in maintaining a strong and thriving private rented sector. The increase in CGT could have impacted appetite to invest in the sector and reduced the supply of rental properties. Additionally, a large increase in CGT could have prompted a number of landlords to consider selling up in order to beat any CGT deadlines and thereby ousting happy (and in some cases long term tenants and families) from their homes.
“It’s important that the Government avoids implementing too many initiatives that disincentivise landlords from investing in the sector. If they do, they must simultaneously make provision for high-quality rental stock via alternative means, otherwise they risk increasing what is already a large demand and supply gap, and invariably increasing rents further.”
For those that run companies with annual profits of under £50,000 – that’s around two-thirds of all companies – there will be no change to the current 19% rate of corporation tax. But from April 2023, those generating profits above £50,000 will be subject to a tapering increase.
With the tier only increasing from the base of 19% gradually after a £50,000 annual profit, this will not impact the majority of small landlords that made the decision to incorporate into a limited company for tax reasons.
Only companies earning over £250,000 profit (the top 10%) will be taxed at 25%.
Expectations for 2021
If the vaccination roll-out continues to be successful and allows the country to go back to a ‘new normal’ by June, the economic news is perhaps better than could have been hoped for. Forecasts suggest the economy will grow by 4% in 2021 and, although there were fears of double-digit unemployment, it’s expected to peak at 6.5%. This hopefully means fewer people will be affected in terms of keeping a roof over their head, be that owning or renting.