It only seems a few weeks ago that Phillip Hammond was taking the floor in his inaugural budget as Chancellor – however, that was way back in November, and wow, how things have changed since then! With much of Westminster’s focus on the triggering of Article 50, the Spring Budget was a rather more subdued affair than we were used to from Hammond’s predecessor George Osbourne, with much of the focus on bracing the country’s finances against any negative impacts against the UK’s exit from the EU, and preparing the next generation of earners.
But what will this mean for the country’s landlords and tenants? After the shock of the recent Housing Whitepaper, it seems like a Budget is the last think everyone needs – after all, the past couple haven’t been notoriously kind to the BTL market…
With only a few short weeks to go before the major tax changes come in to force, many landlords across the UK wince whenever the T word is mentioned – however, this budget was perhaps one of the least, well, taxing on landlords. However, it’s not all plain sailing!
It has been revealed that the income created by Council Tax needs to be increased by £6 billion a year by 2020 to meet social care costs in the UK. In order to fill this huge void, the Chancellor has given the nod for local authorities to make increases of up to 4.99% - the most they can increase by without holding a referendum.
Whilst this will go some way to paying for these vital services, monthly household costs will increase significantly, leaving landlords with a thorny issue – do you reduce the rental rate in order to keep your costs competitive, or hold out hoping that tenants will be able to cope with the increase?
It’s not all bad news though. Whilst he took with one hand, he did give with another – the Chancellor did announce that the personal allowance and national living wage will rise again to reach the targets of £11,500 a year and £7.50 an hour by April. The new personal allowance will deliver a tax cut to 29 million people across the UK, and the increased living wage means real life wages have grown for the 27th straight month. Whilst this increase won’t necessarily counteract the cost leaving our pockets, it might go some way towards helping a little!
It may have been too much to ask for Mr Hammond to scrap one of the most contentious changes to the BTL market in recent times. The additional 3% Stamp duty levied on investment properties has meant many potential landlords have shied away from investing, and contributed to pushing up the rental rates of existing homes, and was one of the most keenly anticipated amendments.
Plenty of economists have offered up solutions to this contentious issue in the lead up to the budget, from scrapping the tax altogether, removing it from build-to-rent properties, or even changing the rules so stamp duty is paid by the seller – however Mr Hammond has held firm on this.
With Bebington in the Wirral named the best place to live and work in the UK in a recent study carried out by the Centre for Economic and Business Research and the Royal Mail, it seems that the Northern Powerhouse is continuing to boom. The Chancellor touched on this, with a promise to plough more funds into the development of the Industrial Strategy, including significant investment in transport infrastructure.
This is great news for investors who have taken the plunge and bought property in the major northern towns, as they are likely to see their investments increase in value. As more businesses flood to the areas, taking advantage of the promised new transport and technology investments, there will be many new tenants looking to move in, and an investment in the Northern Powerhouse could well have been a canny buy!
However, as well as continued investment in the Northern Powerhouse, Mr Hammond also promised considerable funding to kick start the ‘Midlands Engine’ too. We may well be seeing a spotlight on the central regions of the UK, following a pledge for a hefty chunk of investment in transport and ‘living standards’, led by local government.
In a bid to pave the way for the leaders of tomorrow, the Chancellor announced significant education reforms in the Budget, including the building of 110 more free schools across the country, which could have a real impact on landlords, up and down the UK. Research has shown that whatever else is happening in the world, one of the key drivers for family renters is the location of a property in relation to a school, with some people even prepared to uproot their family in order to secure their child a place in their ideal school. With more funding being poured into the development of new schools up and down the country, this could mean potentially increased interest in some areas, great news for potential landlord on the lookout for a long term
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