Chancellor George Osborne announced his Spring Budget this week. Here, we take a look at what his news means for the UK’s property market, and the implications for investors in the coming months.
Extensions to the Stamp Duty Land Tax
There are no plans to halt the introduction of the new Stamp Duty Land Tax surcharge for buy-to-let investors. If property buyers are not planning to live in their purchase, they will be subject to a 3% levy from 1st April 2016. However, important alterations have been made to this legislation in the latest Budget.
Large-scale buyers will now be affected by the levy, which means that investors who wish to buy over 15 properties will also need to pay more than initially expected. Concerns have been risen about the likelihood of increasing home supply in the country, as large-scale investors are key in the financing of much-needed new developments.
On a more positive note, homeowners will now be granted a three year period of ownership overlap thanks to the implementation of a longer grace period for those who temporarily own two residential properties in the UK. If a buyer chooses to sell one of their properties during this period, they will be able to claim back the 3% surcharge paid.
House building and supporting home ownership
The UK government remains committed to supporting those who wish to own their own home, as noted by the continuation of the Help to Buy scheme and the new Lifetime ISA initiative.
Taking action to simplify planning processes will, in theory, encourage developers to meet demand at greater speed. But despite these steps, other measures are set to ensure that constructing enough properties to satisfy the market remains a challenge. For example, the expected introduction of stricter taxation rules for offshore organisations who are involved in property developments in the UK will create another barrier to the fast completion of important regeneration projects.
Personal income tax changes
Amendments to personal income tax were announced by Osborne. In April 2017, the annual tax-free allowance is set to rise from £11,100 to £11,500. At the same time, the benchmark for the 40% tax band will increase from £42,385 to a much more rounded £45,000.
The change that will have the most marked impact on property investors is the introduction of a new £1,000 personal allowance for property-related income. This will be added on to the general annual tax-free allowance, and essentially means that property investors will not be taxed on income up to £12,500 per annum. This legislation will also come into effect from April 2017.
Better connectivity is set to impact on property prices
Osborne announced that capital has been secured for two key infrastructural projects.
Crossrail 2, comprised of a North to South route through London, which will be receiving £80 million in development funding. This is of particular interest to investors as the introduction of Crossrail 1, which will run from Reading to Shenfield, has already had a substantial impact on the price of property at key locations in and around London that will soon be better served by public transport.
The high speed rail link between Leeds and Manchester, set to significantly improve commutes for thousands of workers in the North, will receive £60 million, and commentators are expecting a similar effect on property prices in this region due to more robust connectivity.
Is our economy serving a strong property market?
Osborne’s decision to revise down the growth forecasts for the domestic economy have not come as a surprise to those concerned about the implications of the UK voting to leave the European Union in the Referendum later this year. 2% growth is expected across 2016; 2.2% in 2017; and 2.1% in 2018.
In summary, despite some threat of instability, investors in particular are still facing strong prospects for growth in wake of the Spring Budget.
To learn more about how the recent announcements may affect you, contact our consultants today.