Autumn Budget 2021: What Property Investors Need to Know

How will the changes announced in the Government’s 2021 Autumn Budget impact buy to let landlords and property investors? Managing Director, Gavin Richardson, explains the key points from the announcement.

With inflation predicted to peak at 4%, incurring noticeable increases to everyday costs such as food, fuel and energy, the UK economy is in a delicate balance. Having announced changes to National Insurance, Corporation Tax and Dividend Tax earlier in the year, we weren’t expecting another swathe of tax increases to help repay the estimated £350 billion debt incurred by COVID. Still, it wasn’t out of the question.

For your ease, here are the important announcements that will impact landlords and property investors.

Housing

Within the £24 billion pledged to housing, an allocation of £11.5 billion will build 180,000 affordable homes. These new developments will primarily use brownfield sites (derelict or unused land). While a step in the right direction, this is not enough to fix the ongoing housing crisis, meaning that landlords and rental properties will still need to provide housing for millions of people. Consequently, you can expect demand and rent rates to continue rising. 

Transport Upgrades

The Chancellor confirmed £100 billion a year would help upgrade UK infrastructure, including roads, railways and London-style transport systems in other city-regions. Ahead of the budget, rumours suggest that Greater Manchester, the West Midlands and South Yorkshire will get some of the largest allocations from this pot.

How will this impact landlords?

Improving transport links in any area can boost job opportunities and therefore demand for homes nearby. Unlike the other changes announced in this year’s Autumn budget, this is a slow burner, but could help pinpoint up-and-coming areas for buy to let investment. Regions such as Manchester and the West Midlands already provide excellent yields for landlords, and house prices are steadily increasing, making them a prime spot for investment.

High-Rise Flat Cladding Scandal

To raise the estimated £5 billion needed to cover the costs of removing dangerous cladding from high-rise buildings, the Chancellor announced a Residential Property Developers Tax. The new tax will only apply to developers with profits above £25 million and will be charged at a rate of 4%. Hopefully, this will start to release the thousands of mortgage prisoners unable to sell or remortgage properties with cladding issues. We will keep you updated with further developments about timescales, but at least there is light at the end of this awful tunnel.

50% Business Rates Cut for Hospitality

To better support businesses severely impacted by the pandemic, retail, hospitality, and leisure companies will have a one year, 50% reduction to business rates up to £110,000. This is positive news for property investors with commercial units whose tenants may have struggled over the last 18 months.

Capital Gains Tax (CGT)

Once again, despite many rumours suggesting the Government would go back on the CGT freeze (in place until 2026), the Chancellor made no mention of changes to this tax or allowances. For landlords looking to incorporate or sell investment property, this will come as a huge relief, as it can often be a high cost.

Green Homes Grant

Despite considerable speculation about a (much needed) replacement for the axed Green Homes Grant, nothing was formally announced. No doubt, this is a great blow to many looking to make their property more energy-efficient. Furthermore, with the Minimum Energy Efficiency Standards changing for landlords in 2025the need to make these changes in the private rental sector is critical.

So far, the only green promise relating to housing is grants of up to £5,000 to upgrade gas boilers to low-carbon heat pumps (it costs, on average, £6,000 - £18,000 to install an air-source heat pump). However, it’s still unclear whether this will be available for landlords to use in investment property. Furthermore, while some 25 million homes currently have gas boilers, the grant will only cover the costs of 90,000 pumps over the next three years.

Unemployment

Positively, despite initial predictions around unemployment hitting 12% due to the pandemic, the experts have significantly reduced the estimate to a peak of just 5.2%. However, if your tenants face financial difficulty, find out what you can do to help them and protect yourself in our blog.

In summary, landlords have come out of the latest budget unscathed despite much speculation around increases to CGT and council tax. However, it’s disappointing that no replacement for the Green Homes Grant appears imminent to help landlords meet EPC requirements by 2025. There are other ways to help with the costs of this, so please do speak to the team to review your options. Call them on 0345 345 6788.

NB: ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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