What the Spring budget means for Landlords
There was no mention of reinstating tax relief on mortgage interest payments or cutting stamp duty, which would have benefitted the private rented sector, but there were other positives to be drawn from the Chancellor's Spring budget for landlords.
The Chancellor, Jeremy Hunt, presented his Spring Budget 2023 today, and although there was no mention of reinstating tax relief on mortgage interest payments or cutting stamp duty, there were some measures of interest for landlords.
The Chancellor announced that the UK will avoid a technical recession and stated that "inflation has peaked" with a prediction that it will fall to 2.9% by the end of the year. He also set out the measures that he hopes will boost the economy. Some of these measures will affect the lettings industry, including changes that will impact tenant affordability and landlord costs.
Pension allowance increase and lifetime allowance abolished
The government has increased the amount that people can add to their yearly pension allowance before paying any extra tax, rising from £40,000 to £60,000. The lifetime allowance was also abolished which impacts the amount that you can save in a workplace or private pension scheme before you pay extra tax on the excess. As renters are getting older, this is a renter's affordability consideration for the longer-term.
Energy price guarantee extended until June 2023
The existing energy price guarantee - which was due to end this month - will now continue for an extra three months, ending in June 2023 instead. As energy costs are expected to fall from July onwards, this means that 'typical' households will continue to have an average annual bill of £2,500. This is expected to save around £1,500 when you combine the energy price guarantee and the Energy Bills Support Scheme. Those on pre-payment meters will see their charges brought in line with comparable direct debit payments, which is aimed at helping some of the poorest households.
A boost to their budget for those with children
The Chancellor outlined three new measures for parents:
30 hours of free childcare will be available for working parents in England, which has been expanded to cover one and two-year-olds, in addition to three to four years olds as is currently the case.
Families on universal credit will receive childcare support up front instead of in arrears, with the £646-a-month per child cap raised to £951 per month, for eligible families.
Parents with school-aged children find it difficult to find work as there is a lack of wrap-around care at both ends of the school day. The government will now fund schools and local authorities to increase the supply of this care, so that all parents can drop children off between 8am-6pm, by September 2026. There are also £600 "incentive payments" for those becoming childminders, and relaxed rules in England to let childminders look after more children.
All these measures will help to increase the budgets of tenants with children, and will provide landlords with more certainty around their ability to pay the rent.
No direct tax relief support for landlords
Corporation tax will increase from 19% to 25% in April, with businesses that make a profit of more than £250,000 paying this increased rate. Although unlikely to affect the majority of landlords, some landlords with large portfolios operating as a company will see an increase in tax costs. Prior to the budget, reinstating the tax relief on mortgage interest payments and cutting stamp duty were two proposals to help support the private rented sector, but sadly these were not mentioned.
Devolution of power to local authorities may have a housing impact
Greater Manchester and West Midlands Combined Authorities will be given more powers to "set the strategic direction over the Affordable Housing Programme in their areas". However, the possibility of rent controls being introduced was not mentioned.
The fact that the Chacellor believes that we have avoided a "technical recession" is positive for the property industry. Recessions tend to be marked by a drop in house prices. This would mean less savings required on deposits and less borrowing too - helping give first time buyers a boost. No recession means that house prices are likely to remain at higher rates, although the current mortgage interest rates will be a factor. If these fall again by the end of the year - although unlikely to drop to the same "pre-Truss" levels as last year - will none the less be a positive factor.
If you want to find out more about how we could let and manage your rental property, call 0161 511 5339 or contact us to speak to one of our lettings specialists.
This blog is intended as a guide only and does not constitute legal advice.
