In the Spring Statement, the Chancellor Jeremy Hunt announced measures that will affect tenants and landlords alike. He shared that inflation has peaked and the UK will avoid entering a “technical recession” later this year. In this post, we look at the key tax changes that property investors need to know about.
“Landlords everywhere will be feeling underwhelmed after Jeremy Hunt’s budget. There was no mention of the housing crisis nor any tax changes which would help landlords. The energy support measures and childcare reforms announced will help tenants, however many 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.”
Corporation Tax is going up as expected from 19% to 25%. Firms making more than £250,000 profit will pay 25% tax from April 1 2023.
Businesses will be able to claim a 100% capital allowance for the next 3 years from 1 April, reducing their overall tax bill.
From 1 April 2023 until 31 March 2026 investments made by companies in qualifying plant and machinery will qualify for a 100% first-year allowance for main rate assets. This means companies across the UK will be able to write off the full cost in the year of investment, known as full expensing.
Companies investing in special rate (including long life) assets will also benefit from a 50% first-year allowance in the year of investment.
Unfortunately property investors can’t claim capital allowances for residential property, but they can be claimed for furnished holiday lets (FHLs) and IT equipment, such as a new laptop, used to run their business.
The Energy Price Guarantee will be maintained at £2,500 for a further three months. This was due to rise to £3,000 on 1 April.
Also announced was a plan to bring energy pre-payment meters in line with direct debits from July.
This is good news for everyone, but will particularly help to reduce the energy bills of tenants on pre-payment meters.
There were two key changes to pension tax in the Budget:
The Annual Allowance will increase from £40,000 to £60,000 from 6 April 2023
The Lifetime Allowance charge will be removed from April 2023 before the Allowance is abolished entirely from April 2024
The aim of these reforms is to ensure that high skilled individuals such as doctors are not disincentivised from working.
The government also announced it will increase the Money Purchase Annual Allowance from £4,000 to £10,000 and the minimum Tapered Annual Allowance from £4,000 to £10,000 from 6 April 2023. The adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from 6 April 2023. This is the amount you can put in your pension once you’ve already taken a lump sum out.
This is good news for contractors and limited company landlords who will be able to save more into pensions.
12 new Investment Zones across England will be backed with £80m of funding, including "generous tax incentives".
Also announced was £200m for local regeneration projects
It’s worth keeping an eye on these developments when planning your strategy. Once confirmed, investment and regeneration zones would be good locations for investing in additional properties.
Eligible working parents will be entitled to 30 hours a week of free childcare for 38 weeks a year, for children aged 9 months to 3 years.
This will be rolled out in phases from April 2024 and is in addition to the 30 hours a week already provided for eligible working parents of 3 to 4-year-olds.
Also announced was funding for schools and local authorities to increase supply of wraparound care so all parents of school-age children can drop their children off between 8am and 6pm.
The fuel duty freeze will remain in place and the 5p cut in tax will be maintained.
While there’s not much in this budget to directly support landlords, many of the measures announced will be welcomed by tenants.
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