The UK now officially has a new Prime Minister. That means a new Chancellor of the Exchequer and a new, unscheduled, budget. Although it’s being billed as a mini-budget, the new budget has a lot to unpack for anyone interested in the UK’s property market. Here is a quick guide to its key points.
Stamp Duty is cut
New Chancellor, Kwasi Kwarteng raised the Stamp Duty threshold to £250K for onward movers and £435K for first-time buyers. On the one hand, the move itself has been generally welcomed.
On the other hand, the fact that the move is considered impactful clearly highlights the key problem with the UK’s housing market. There is simply not enough housing, especially not at prices regular people can afford.
Addressing housing ability has been a stated priority for multiple governments. As is often the case with budgets, there is mixed news on that front.
The National Insurance increase is reversed
The 1.25% “Health and social care” levy will be reversed as of 6th November. This should leave a lot of working people better off to some extent. Of course, how much of a benefit it will be will depend on how much it impacted people to begin with. In other words, while it should benefit a lot of people, the benefit will probably be uneven.
With that said, any measure that leaves people with more disposable income is likely to benefit the property market. Landlords should hopefully be less concerned about the prospect (or reality) of arrears. Prospective buyers will doubtless welcome anything that makes it easier to save for a deposit
Income tax cuts are brought forward
The previous chancellor Rishi Sunak promised an income tax cut by 2024 (i.e. just in time for the next scheduled election). This has been brought forward to April 2023. In addition to lowering the base rate of tax by 1p in the pound, Kwasi Kwarteng is also abolishing the top rate of tax. This means that the most high earners will pay is 40%, not 45%.
How this will affect the property market will depend largely on what people decide to do with this money. Realistically, those on lower incomes may need to put the tax they save towards dealing with everyday bills. These seem likely to go up even further given that the pound has recently weakened against other currencies.
Those on higher incomes, by contrast, might be eager to use their savings to improve their overall financial situation. They may be well aware that these cuts could be reversed especially if the next election returns a Labour government.
If they have debts, including mortgage debts, they may prioritise paying these off as much as they can. If, on the other hand, they are debt-free (or have debts they can easily manage), they may look to put this extra money to work. This could mean investing in property. It could also mean investing in the stock market (or a combination of both).
The government makes some business-friendly tax reforms
The headline news for businesses is that the planned increase to Corporation Tax has been scrapped. It will now stay at 19% instead of rising to 25%. This decision will undoubtedly be a welcome relief for businesses. It is, however, worth noting that it only has an impact if businesses actually make profits in the first place.
Another move that received a lot of media attention is the lifting of the cap on bankers’ bonuses. It is, however, questionable just how much impact this will have in the real world. By contrast, the repeal of the IR35 reforms seems to have largely gone under the radar. It is, however, likely to be a cause for celebration for contractors and private businesses alike.
Anything that makes life easier for businesses is likely to benefit the commercial property market. The benefits are also likely to feed through to the residential ones as more work becomes available for more people.
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