Good News, or Bad News? What the Chancellor’s Spring Statement Could Mean for Landlords

What impact could the recent Spring Statement have on YOU as a Landlord for the rest of 2022, and into next year? And, should you be concerned? Talitha Burgess, Managing Director of Clarity Property Management reflects on the key take-aways for landlords.

A week, as they say, is a long time in politics.  

Since the Spring Statement in March, here at Clarity Property Management, now that the dust has settled a bit, we’ve had the time to think about its details, and to reflect on how it could impact you, as a landlord.

Rishi Sunak chose the two-year anniversary of the first national coronavirus lockdown – surely one of the most important “things we wish we’d known about in hindsight”-type events of everyone’s lives. Remarkable, really.  

Coming as it did against the ever-alarming news from Ukraine, and our current cost of living crisis, the Statement was eagerly anticipated.

Just a quick note, however; it wasn’t a full-on Budget – at least not such as we would recognise it. We have to wait until October for further “proper” developments.

Setting the Scene

For the Chancellor, his timing wasn’t great.

Firstly, he was photographed filling up someone else’s car with petrol (awkward) but more importantly, a few hours beforehand there was a collective sharp intake of breath throughout the nation. Why? Because that morning, it was solemnly announced that inflation had just reached a previously unthinkable, and now eye-watering 6.2%. And, it’s forecast to average 7.4% for the year, with a peak of 8.7%.

Combine all of this with sharp rises in energy costs, and interest rates in the doldrums – it’s fair to say that not everything in the garden looks rosy.

However, The Office of Budget Responsibility forecasts that the UK economy will grow by 3.8% this year – better news all round.

What Was Missing for Landlords?

So, shall we start on what wasn’t mentioned, despite previous speculation?

In February, the government announced details of potential widespread rental reforms as part of its levelling up agenda, namely:

• A consultation on a national landlord register
• The end of Section 21 eviction notices
• A minimum standard for all private rental properties
• More fines and bans for so-called rogue landlords

All highly interesting. Controversial, even, and in need of further consultation and clarification. For example, what makes a landlord “rogue”; what does that mean? How do we measure a minimum standard for rental properties?

At present, there’s radio silence on when these proposals would be introduced, and no mention of how the plans could work in practice. Nevertheless, there’s talk of a white paper about these reforms. As soon as we hear, no doubt we’ll be writing about it, but in the meantime – it’s whisper-quiet.

No Buy-To-Let Stamp Duty Increase

Again, despite conjecture (and, as we understand a slip of the pen in a previously released document from the OBR), the government decided against increasing the stamp duty surcharge on additional homes in England from three to four per cent.

Will this tax escape reform again in the Autumn? We’re not sure.

What we do know is that The National Residential Landlords Association has lately been calling for the stamp duty surcharge as a whole to be scrapped. Why? Because they argue that removing this surcharge could add an additional 900,000 private rental homes over the next 10 years. Thus, the Treasury would earn more – considerably more – due to the sheer number of new properties available.

And, we need more rental stock, without a doubt.

The Spring Statement Headlines:

• The basic rate of income tax will be cut in April 2024 from 20p to 19p in the pound, to take place before the end of the current Parliament – the first of its kind for 16 years.
• The threshold at which people start paying National Insurance will rise to £12,570 in July. If you have higher than average earnings, however, news earlier in the year regarding NI will not have filled you with unalloyed joy.

  From April you will have to pay an increase of 1.25% in your contributions. Whilst this figure may seem manageable, try extrapolating it to earnings of say £100,000. Having already lost your personal allowance (and therefore paying more), you will owe an extra – that’s an extra – £1,131 per year to HMRC.

• Fuel duty will be cut by 5p per litre until March 2023.
• The Employment Allowance, which gives relief to smaller businesses’ National Insurance payments will increase from £4,000 to £5,000 from April.

Of Note to Landlords

Greener property owners who install energy efficient materials such as solar panels, heat pumps or insulation will see VAT on these cut from 5% to zero for five years.  The tax savings are estimated to be worth £1,000 up front, and contribute to savings on energy bills for your tenants of up to £300 per year.

Also of Note, and Worth Bearing in Mind – Capital Gains Tax

Further to the Autumn 2021 Budget, Capital Gains Tax is static, and remains at £12,300 until April. Should you dispose of personal possessions worth more than £6,000 (apart from your car), property that’s not your main home, non-ISA or PEP shares, or business assets, you will pay tax on your gains. In other words, your profit.

Regarding CGT, conjecture and analysis amongst those in the know has been getting louder. This is because the threshold is so much lower than the basic rate tax threshold for actual earnings, and therefore is generally considered unfair. No doubt, we’ll keep an eye on this one, too.

The marvellously named Office of Tax Simplification (OTS) has been calling for ways to streamline taxation of property income. Right now, we hear that they’re soliciting landlords’ views and opinions, so change is afoot.

In Summary

In the meantime, if you’re considering renting out your property, or expanding your portfolio, we always say this:

There’s a lot to do, and even more to know. As the above has shown, keeping up to speed with tax reform is just one side of the complicated, multi-faceted lettings sector. We offer high-quality property search services and equally excellent property management expertise, this latter removing the need (your need) to dot all the i’s and cross numerous t’s yourself.

Don’t leave the complicated world of property rentals to chance. Get in touch today, we’re here to help.