The Autumn budget (part 1)

As we countdown to the Autumn budget, which is due to take place on 26 November, we are watching with interest. Against the backdrop of what is currently a relatively turbulent time for the UK government, we really don’t know what’s coming. However, with less than two weeks to go, it’s worth exploring what might happen. So, here’s Warren Powell-Richards’ pre-budget view, with part 2 following after the budget when we can outline exactly what’s happened – and what it means for you.

1. Stamp Duty Land Tax (SDLT)

Yes, we appreciate that the government has a number of financial holes to plug. And one way to plug them is to take a whole new approach to SDLT. Right now, there’s talk about a radical overhaul of the way SDLT is approached. For example, the idea of replacing SDLT altogether with an annual property tax based on a property’s market value has been mooted. 

As to how this might work remains to be seen. Although it has been reported that it would kick in on properties valued at £500,000 and above – with those worth over £1m attracting an even higher rate. Given the average property price of properties in Surrey and Hampshire, this could have sweeping ramifications for a large swathe of our clients. Let’s wait and see what the outcome will be.

Another idea that’s been debated is the idea of making sellers – not buyers – responsible for SDLT. Should this happen, then it would certainly get the house market moving – albeit at the expense of the seller. It might make sellers think twice about moving, should the cost be passed on to them. However, in reality, if you want or need to move, then it’s generally a foregone conclusion; our view is that this would just be another cost that would have to be factored into selling.

2. Capital Gains Tax (CGT)

For so long, the UK public hasn’t had to pay CGT when selling their main home. Could this be changing? Possibly, is the answer. However, if this is phased in, it’s likely to be phased in amongst homeowners on the upper end of the property value chain.

There’s also the possibility that CGT could be increased on second homes, or even the threshold for how much profit property investors make before CGT is applied lowered. This would, of course, only affect our landlord clients. Essentially, in keeping with Labour values, changes to CGT would predominantly target wealthier property owners, sparing those who have lower value properties. However, as mentioned above, Surrey and Hampshire are expensive areas, so will a regional phasing approach be applied if any material changes are made? We’ll find out soon enough.

3. National Insurance (NI) on rental income

Okay, so this is another landlord-specific potential change – but it’s important, nonetheless. As it stands, landlords do not pay NI on rental income, which has placed the topic firmly in the government’s crosshairs.

Little is known about how this might work, including whether or not a new NI tax would be at the same rate as employees/the self-employed, but given how it would instantly become an earner for the government, it’s not hard to envisage things changing post-26 November.

Our view

Right now, this is all purely theoretical as we have absolutely no idea what the government will announce. Based on what we’ve outlined becoming a reality, it would make moving home more affordable for buyers, which would likely result in a huge uplift in movement across the housing market. 

From a sellers’ perspective, moving would become more expensive – but if there’s a surge in movement from buyers, and therefore a higher demand, then sellers may be able to ask for more, which would go some way to offset a new sellers’ SDLT.

From a landlords’ perspective, there’s no way around the fact that the changes outlined here would reduce overall profits. Against the background of a buy-to-let property market that’s continually being squeezed, it would be yet another hit.

However, nothing has happened yet and we could be way off the mark. So, come back towards the end of the month when we will know what it means for you and your property. In the meantime, we’ll watch with bated breath.

Looking to get your property on the market before Christmas? Contact your local branch of Warren Powell-Richards to discover how we can help. Alternatively, find your nearest Warren Powell-Richards office here.