The fiscal event a few weeks ago was billed as a mini-budget. But, if you’d tuned in, you’d have quickly noticed that it was anything but “mini”. Income tax, Corporation tax, National Insurance, Stamp Duty – everything was on the table, in what soon became a full-scale proposal to jump-start UK growth.
But one question remains: how will that proposal affect you, and your investments?
In the short-term, the measures announced by Chancellor Kwasi Kwarteng are a welcome buffer against the rising mortgage costs investors continue to face. Here’s what’s changing, and why it matters.
✅ No Stamp Duty on first £250,000 (£425,000 for first-time buyers), effective immediately
When purchasing a property, you’ll no longer pay any Stamp Duty Land Tax (SDLT) on the first £250,000 of your property’s value. In the face of rising mortgage costs, this could deliver savings of up to £2,500. Say you’re buying a £250,000 property. Previously, that would’ve set you back £2,500 in Stamp Duty, as you’d pay 2% on £125,000 of the property’s value. Now, you’ll pay nothing at all. And, as we all know, any savings at the moment are cause for celebration.
It’s also worth noting the intentions behind the Stamp Duty cut: to encourage more people to buy. As we saw during 2021’s Stamp Duty ‘holiday’, any cuts can send demand surging (and prices along with it). This will improve investors’ capital growth, and overall profit when the time comes to exit. However, with mortgage rates looming larger all the time, the government could’ve gone further on Stamp Duty. The 3% surcharge for investors, for example, went untouched – meaning the bulk of benefits from the Stamp Duty change will fall to first-time buyers.
✅ Basic rate cut to 19%, from April 2023
The UK government will cut the basic rate of income tax to 19% from April 2023 – putting cash back into the pockets of any landlord investing in their own name, rather than a limited company. Of course, Corporation tax will remain at 19% (more on that shortly) which means most investors are unlikely to move away from limited companies (and all their additional tax benefits) any time soon.
✅ Planned rises up to 25% in April 2023 cancelled
The UK Government has reversed its previous proposal to increase Corporation tax on profits over £50,000, with the rate hitting 25% for anything over £250,000. Instead, it’ll stay at 19% across the board. This, again, is welcome news – as investors with substantial portfolios across multiple companies would’ve otherwise seen a nasty bounce in their tax bills. The decision ensures limited company buy-to-let will remain an attractive, tax-efficient route for thousands of investors.
This is where things get interesting – and slightly harder to predict. This mega-mini-budget didn’t just offer concrete tax changes. There were a raft of other initiatives too, some of which have the potential to massively affect the UK property market. Let’s look at two of them.
The government announced that it’s currently in conversations with 38 local authorities to create new investment zones across England. While they’ve yet to disclose full details, the zones look set to promise low (or no) Stamp Duty, slashed taxes, and reduced planning regulations. These will incentivise investment, increase surrounding property prices, and provide investors with new opportunities throughout the country.
Our latest research shows that 93% of investors struggle to find high-performing properties. Partly, that comes down to a lack of supply. So investors ought to rejoice at the UK government’s intention to slash some of the red tape around planning. Why? Because it’ll mean more properties in the market, more choice, and more investment opportunities.
What’s more (putting on our optimist’s hat), new planning proposals could also put an end to the cycle of ‘boom and bust’, a feature of the UK’s property market for decades. Now, with a bit of luck, investors can expect a return to reasonable prices, and steady growth.
Chancellor Kwarteng has signalled his intent to keep on cutting – taxes, regulation, and more besides. So investors should keep an eye out for more government initiatives aimed at boosting investment. But that’s not to say that the measures announced last week aren’t significant. On the proposed growth plan, Moubin Faizullah-Khan, GetGround’s CEO & Co-Founder, said:
“At a time when landlords need that bit of extra confidence, these are the measures we wanted to see from policymakers. Some landlords now stand to save thousands, and the efficiencies of limited company structures for managing buy-to-let property remain strong.
“But cutting Stamp Duty isn’t a silver bullet. There’s still a chasm between supply and demand, while mortgage affordability is an ever-growing concern for both existing and aspiring buyers. I’ll be on the lookout for further measures supporting the private rental sector – for the thousands of landlords and millions of tenants who rely on it.”
This is for your information only – you shouldn't view this as legal advice, tax advice, investment advice, or any advice at all. While we've tried to make sure this information is accurate and up to date, things can change, so it shouldn't be viewed as totally comprehensive. GetGround always recommends you seek out independent advice before making any investment decisions.