In his much awaited speech in Parliament yesterday, Chancellor Philip Hammond failed to expand upon the Government’s plans to tackle the UK housing crisis in what industry experts have labeled a ‘bitterly disappointingly lackluster Budget’.
Missing the opportunity to ease the stamp duty burden on first-time buyers, or to offer further information about the promised starter homes and release of land to build initiatives (as detailed in a recent Housing White Paper), instead the Chancellor made minor tweaks to announcements from previous budgets.
For example, the Government is to delay the reduction in the filing and payment window of stamp duty until 2018/19. Originally the payment window was to be cut from 30 to 14 days in 2017/18, but buyers will now have 30 days to file and pay their stamp duty for one year longer.
Offshore property developers were hit with unwelcome news. The Government is amending legislation, with immediate effect, to ensure that tax will now be payable on all profits realised by offshore property developers developing land in the UK, including those on pre-existing contracts.
However, it was the rise in National Insurance (NI) contributions for the self-employed that really hit the headlines. In order to reflect the increased state entitlements received by self-employed workers, Chancellor Hammond announced that Class 4 National Insurance contributions will be increased by 1% to 10% from 2018, and to 11% in 2019, raising £1.5bn in revenue per year by the 2020/21 tax year.
In real terms, Hammond said that the change will cost a typical self-employed worker an extra 60p per week.
Another focus for the 2017 Budget was the reduction of dividend allowance from £5,000 to £2,000. Stating that the dividend allowance introduced by his predecessor George Osborne had been an “extremely generous tax break”, Hammond said that the revision would come into effect from April 2008.
Commenting on the announcements, Hope Capital chief executive Jonathan Sealey said:
“Today’s Budget sees a real hit for small businesses and the self-employed. The cut in dividends and the rise in National Insurance payments equates to a tax hike, estimated by the BBC as being up to £2billion. This could well hit both brokers and developers, many of whom are small businesses. The risk, where developers are concerned, is that where many invest their own money, they will now potentially have less money to put into new projects which will affect the amount they can borrow.
“The worry is that this is the start of a trend of business bashing that the Chancellor is embarking on which could ultimately affect the level of development that takes place, with a knock on effect on the number of new houses built or refurbished by smaller developers – at a time when the Housing White Paper said that this is an area that the government wanted to expand.”
Richard Lambert, chief executive, National Landlords Association, added:
“The Chancellor has passed up his last opportunity to reverse the damaging plans to restrict mortgage interest relief for landlords before they hit, or even to act on suggestions as to how he might ease the immediate impact. Sadly, he still seems convinced by the Treasury’s analysis of the consequences, and it looks like he will only change his mind when the reality proves different.
“That’s little comfort to the landlords who will be forced up a tax bracket as a result of the changes or potentially forced out of business, nor their tenants who will be faced either with higher rents or the struggle to find another home in an already pressured housing market.
“However, we’re pleased the government has listened to our calls to delay the implementation of the Making Tax Digital programme as it has the potential to cause chaos as landlords struggle to get to grips with the demands of submitting quarterly tax returns online”.
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9th March 2017