In the Autumn Statement, the Chancellor Jeremy Hunt set out his plan to stabilise the economy and reduce inflation through wide-ranging ‘stealth’ tax rises and spending cuts. In this post, we look at the key tax changes that property investors need to know about.
“Landlords everywhere will be breathing a sigh of relief after today’s budget. There was a lot the government could have directed at the property sector to make up the deficit but in the end those measures weren’t forthcoming. The package for low earners, which should mean people are more able to afford energy bills and rent, should be viewed as a positive for bringing some stability to tenancies.
“We’d recommend every landlord reviews their portfolio now, and given the changing economic outlook, moves to a three to six monthly review cycle. Even if inflation and rates stabilise/fall they won’t suddenly drop. It will take time. Now could be the moment to sell under-performing properties and re-invest in higher yielding ones. Doing this review will also highlight options to take advantage of the potential tax-savings that come from buying via a limited company.
"Despite the government's measures, many tenants will still struggle with the rising cost of living, which could pose a moral dilemma for landlords squeezed by rising costs and lower yields who need to raise rents to remain profitable.
“Consider your tenants and their ability to cope with a rent increase. Be prepared to put in place a plan to recover any missed rent payments. Keep checking in on your tenants and if necessary, work together with them to find a solution that works for you both.
"The plan for introducing Making Tax Digital for landlords wasn’t adjusted or cancelled in the Autumn Statement. The £10,000 income threshold remains, and the date to introduce it is still April 2024.
"Currently, 1.4 million landlords are in scope. However, with inflation and interest rates as they are, landlords may need to make adjustments to rental rates and this could tip up to 100,000 landlords who previously wouldn’t have qualified for MTD into scope."
Provestor CEO, James Poyser
Stamp Duty Land Tax cuts to remain until 2025
The increase to the nil-rate threshold of SDLT from the mini budget on 23rd September is now a temporary reduction.
Jeremy Hunt said the SDLT cut will remain in place until 31 March 2025 to support the housing market.
Reduction in Capital Gains tax annual exemption
The government will reduce the Capital Gains Tax Annual Exempt Amount from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024.
This isn't good news for landlords looking to sell.
Dividend allowance cut from 2023
The government will reduce the Dividend Allowance from £2,000 to £1,000 from April 2023, and to £500 from April 2024.
This will impact landlords using limited companies who withdraw profits via dividends.
Threshold for top rate of income tax cut from 2023
The threshold for when the highest earners start paying the top rate of tax will be brought down from £150,000 to £125,140 from 6 April 2023. The Chancellor said that those earning £150,000 or more will pay just over £1,200 more a year.
Personal income tax thresholds frozen until 2028
Income tax, National Insurance and Inheritance Tax thresholds will be maintained at their current levels for a further two years.
This means millions of people will be paying more tax on their incomes over time as wages increase and people move into higher tax brackets.
The energy industry will be hit with an expanded windfall tax of 35% until March 2028.
Electric vehicles will no longer be exempt from Vehicle Excise Duty from April 2025 to make the motoring tax system fairer.
The government has maintained its commitment to major infrastructure projects including East West Rail, core Northern Powerhouse Rail, and High Speed 2 to Manchester.
These will provide fast, more reliable services and connect people to new job opportunities.
A new nuclear power plant will be built at Sizewell
The Chancellor said this will create 10,000 new skilled jobs.
This could potentially be an area for investment opportunity in serviced accommodation or short-term lets/Airbnbs.
Support for energy bills will remain in place this winter, with the Energy Price Guarantee rising to £3000 from April 2023 and further support targeting those most in need.
Support for businesses
There will be targeted support to help with business rates costs worth £13.6 billion over the next 5 years.
This is positive news for investors with commercial tenants.
There will be an increase in the National Living Wage from the current level of £9.50 an hour for over-23s to £10.42 an hour.
The government will also raise benefits, including working age benefits and the State Pension, in line with inflation from April 2023, ensuring they increase by over 10% in line with September’s inflation figure.
Whilst these latter measures may not be of direct benefit to landlords, they may well be welcomed by tenants, helping to reduce the risk of prolonged void periods.
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