A budget for the 'Next Generation' - what does it mean?

A budget for the 'Next Generation' - but what does it mean for you today?

'Reform to improve schools, investment to build homes and infrastructure – because we know that’s the only way to deliver real opportunity and social mobility'.

Transport infrastructure

George Osborne has given the green light to High Speed 3 between Manchester and Leeds; an extension to the M62, creating 4-lane motorway; upgrade the A66 and A69 in the North Pennines; Crossrail 2 in London; and has pledged to develop the case for a new tunnelled road from Manchester to Sheffield.

What does this mean for me?

Better transport infrastructure means better connectivity across the country, and good transport links is one of the best selling points you can ask for! We’ve recently seen what regeneration through transport investment can do for areas such as Reading with the creation of Crossrail:

  • Buyers: Good for first time buyers who are looking to invest in cheaper housing now.
  • Landlords: Good investment opportunity in cheaper areas, might be better value despite the 3% hike
  • Tenants: more landlords investing, more competitive rents in popular areas.

Commercial Stamp Duty

The Budget announced that commercial stamp duty will be brought in line with the changes seen in residential SDLT last year. Changes have been brought in in order to help small firms.

From midnight tonight, commercial stamp duty will have a 0% rate band on properties up to £100K, 2% on the next £100k and 5% over £250k. There are transitional rules for purchasers who have exchanged, but not completed contracts before midnight.

The changes are believed to raise £500 million a year, with only 9% of buyers spending more. It is believed that 90% of buyers will benefit from the scheme, and will see their tax bills reduce or stay the same.

What does this mean for me?

Not a lot, unless you are planning to buy a commercial property. If you are, check which banding your property falls under – you might just have timed it perfectly!

Buy-to-Let Stamp Duty

Sadly, the George Osborne didn’t call a halt to the planned stamp duty hikes set for April, so the 3% increase for BTL properties will still be going ahead.
However, he has ‘listened to colleagues’ and the rates will apply to large investors too.

What does this mean for me?

If you’re an investor or looking to buy a second home, you’re going to be paying significantly more stamp duty – however many properties you own. However, the about turn on the large investor loophole has leveled the playing field slightly.

‘Our failure for a generation to build new housing and new transport has been identified as a major problem. But we are the builders.’

Flood defences

In the wake of terrible winter weather causing millions of pounds worth of damage and heartache across the country, a pledge to allocate £700m to upgrading the country’s flood defences couldn’t have come at a better time.
In order to get the funds together, the Chancellor has increased the standard rate of Insurance Premium Tax by 0.5%, and has planned to channel all the money raised to flood defense spending.The Environment Secretary will have power over determining how the money is best spent, with schemes for York, Leeds, Calder Valley, Carlisle and Cumbria already being given the go-ahead.

What does this mean for me?

If these parts of the country are better protected against floods and poor weather, not only does this benefit existing home owners, but it also opens up new areas of possibility for buyers.

Mortgage lenders are likely to be more inclined to lend on properties in these areas if they are properly protected, whereas at the moment it is unlikely that many lenders would want to take a risk on such a location. The changes will also make the properties easier to sell and let, and in turn, regenerate areas which have been badly affected by the very worst extremes of UK weather.

Garden Cities

There has been much talk of Garden Cities and more recently ‘Garden Suburbs’ by the current Conservative government, with councils encouraged to build developments on the outskirts of existing estates, producing up to 5,000 new homes in each town. In retaliation to George Osbornes’ Budget speech today, Leader of the Opposition Party Jeremy Corbyn commented that the new Garden City at Ebbsfleet had resulted in only 368 properties’ being built, even after 30 announcements from the Conservative party hailing its triumphant arrival – 12 properties per announcement. He’s requested many more public announcements from the government to promote much more building.

What does this mean for me?

  • Buyers: If the Chancellor comes through with his promise to deliver thousands of new properties for first time buyers, it’s great news for First Time Buyers under 40 – as long as they have the deposit to snap one of Osbornes properties up! There is likely to be a huge amount of competition for one of the new properties, and there are no guidelines as to when they will start to appear, so many FTB are likely to be spending money on rent for some time yet…
  • Landlords: However, it’s not great news for landlords. Many of the schemes are aimed exclusively at FTB who are going to inhabit the property themselves, so there’s not much doing for the private lettings market! That said, most FTB will be eager to take advantage of the reduced rate, and may look to buy one of these properties rather than a traditional stock elsewhere, freeing up the congested market – possibly leaving more room for investors?

'We know that the best way we can help working people is to help them to save and let them keep more of the money they earn'.

Personal tax allowance

The amount you can earn before you have to pay tax will rise. The Chancellor announced changes to income tax with a new personal allowance of £11,500, up from £10,600.

The Government say it will hit £12,500 by 2020. The point at which high earners start to pay 40p income tax is also expected to increase to £42,385 to £45,000.

ISAs

From April 2017, the limit on ISAs will increase from 15,000 to 20,000 a year. The Lifetime ISA (which you can roll you Help to Buy ISA into) will be launched to help people save long term to buy their own home, or their retirement.For every £4 that is put into the Lifetime ISA, the Government will put in £1 as well – the savings equivalent of a tax free pension. What’s more, you won’t be taxed when you take your money out.What does this mean for me?

Buyer: Opportunity to save more for a deposit
Tenant: Save for property, better financial viability, more security
Landlord: Tenants have more financial security

'In this budget we want to put rocket boosters on the backs of enterprise and productive investment'.

National Insurance

From 2018, Class 2 National Insurance contributions will be abolished, helping 3.4 million self-employed people. The contributions are currently set at around £2.80 a week, and contribute to state pension entitlements and other benefits.

Capital Gains Tax

UK Capital Gains is one of the highest in the developed world, and the Chancellor made moves to amend this, however it wasn’t in the favour of everyone…

The headline rate of capital gains tax will be cut from 20% to 28%, but will not apply to residential property. The old rates will still apply to chargeable gains on the sale of a residential property such as a second home or a buy-to-let property, and also to "carried interest" - the jargon name for profits made by executives in private equity investment firms.

Business taxes increases

One of the biggest cuts in today’s budget was the announcement of huge reductions in corporation tax.

As of April 2017, the new threshold for small business rate relief will raise from £6,000 to a maximum threshold of £15,000, and the threshold for the higher rate will increase from £18,000 to £51,000. 600,000 small businesses will pay no business rates at all, and a further 250,000 businesses will see their rates cut.

Employment

Alongside the budget announcements, the Office of National Statistics released a report today which announced that unemployment has dropped by 28,000 to 1.68 million from November 2015 to January 2016, with average pay (excluding bonuses) increasing by 2.2%.

The Chancellor continued with this information, elaborating that 150,000 more people are in employment nationwide than was predicted in the November Autumn Statement, and unemployment rates are falling fastest in the North East – further cementing his plans for the Northern powerhouse which is being created with infrastructure and investment projects.

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