Yesterday’s Budget announcement from Chancellor Rishi Sunak included some significant announcements, notably in the property sector.
But what’s the impact of the 2021 Budget on Landlords,Letting Agents and Property Managers? HomeHero finds out.
Landlords and Letting Agents have both rounded on the Chancellor’s Budget for not offering enough money to support buy-to-let owners and renters struggling with their finances because of the coronavirus pandemic.
“The Chancellor’s pledge to do whatever it takes to support those affected by the pandemic will ring hollow for thousands of tenants and landlords across the country,” he said.
“Despite this the Chancellor has failed to provide the sector with the financial support needed to pay off rent debts built because of the virus.“
Renters Fear Losing Homes
Without help to get arrears cleared, many tenants face the prospect of losing their homes and having damaged credit scores, which will undermine the government’s efforts to help generation rent become generation buy.
Letting agents also warn of an impending crisis in the private rented sector.
“Extending the £20 increase to the Universal Credit Standard Allowance and the furlough scheme until September will help tenants plan ahead but much more is required to avoid a mounting crisis in the private rented sector,” said Timothy Douglas, Policy and campaigns Manager at the Association of Residential Letting Agents (ARLA).
“As the impact of COVID continues to bite and unemployment rates rise, we are increasingly concerned about how tenants will avoid future rent arrears and landlords will remain incentivised to stay in the rental market. There is a real need for the UK Government to ensure a wider package of measures to help tenants and landlords keep the rent flowing.”
Chancellor Rishi Sunak’s major Budget 2021 tax policy is to hike Corporation Tax from 19% to 25% from April 2023 to raise sorely needed cash to reduce spiralling government debts.
Company Tax hike For Landlords
In his speech, the Chancellor promised to carry on with his pledge to do whatever was needed to tackle the effects of COVID-19 on jobs and the economy.
“I said I would do whatever it takes; I have done; and I will do so. We have announced over £280 billion of support, protecting jobs, keeping businesses afloat, helping families get by,” said Mr Sunak.
The news Corporation Tax is going up may come as a surprise for many landlords. Many of whom formed companies to ensure their letting businesses could escape the recent scrapping of mortgage interest relief for higher rate taxpayers.
From April 1, 2023, Corporation Tax will work like this:
- Companies with profits of less than £50,000 a year will benefit from a new Small Companies Relief that pegs Corporation Tax at the current rate of 19%
- Companies with profits between £50,000 and £250,000 will pay a discounted rate that tapers between 19% and 25% – the higher their profits are up the scale, the higher their tax rate
- Companies making profits of £250,000 or more will pay the full rate
“To balance the need to raise revenue with the objective of having an internationally competitive tax system, the rate of Corporation Tax will increase to 25%, which will remain the lowest rate in the G7,” said a Treasury spokesman.
“To support the recovery, the increase will not take effect until 2023. Businesses with profits of £50,000 or less, around 70% of actively trading companies, will continue to be taxed at 19%.
A tapered rate will also be introduced for profits above £50,000, so that only businesses with profits of £250,000 or greater will be taxed at the full 25% rate.”
Buying A Home And Stamp Duty
The Chancellor extended the stamp duty holiday in England for another three months. He also announced plans to help home buyers with deposits.
The current stamp duty holiday will now last until June 30th. This leaves stamp duty at zero for a home worth up to £500,000.
From July 1st until September 30th, the nil rate band will half to £250,000. Beyond that, it will fall back to the normal level of £125,000 from October 1st.
The Landlord additional rate stays the same, with no stamp duty.
Meanwhile, home buyers and movers struggling to find a deposit can join the mortgage guarantee scheme which runs until December 31st.
Under the scheme, the government will underwrite 5% property deposits for buyers with good credit records. The maximum deposit will be £30,000 against a home valued at £600,000.
The scheme is not open to landlords.
Personal Taxes Frozen For Five Years
Other tax changes will affect Landlords and letting agents as well.
Mr Sunak has pegged income tax, capital gains tax and inheritance tax reliefs and allowances at their 2021-22 rates for five years.
Before then, the income tax personal allowance nudges up £70 to £12,570 a year and the higher rate threshold rises to £50,570. The rates then remain at those levels until April 2026.
Inheritance Tax and Capital Gains Tax rates, reliefs and allowances stay the same until April 2026.
The Chancellor had little to say about personal savings and investments.
Again, reliefs and allowances remain untouched. Howver, NS&I, the national savings body, will launch a green bond in the summer. This is to allow ordinary savers to stake some cash against tackling climate change.
Details of the scheme will follow in a few weeks, said the Chancellor. He did not change pension contribution limits and the ISA £20,000 annual cap. Fuel and alcohol duties were frozen for another year.
More Support For Holiday Lets
Property investors running holiday letting business have another three months free of business rates.
From April1 until June 30, holiday cottage owners pay no business rates in England. For the rest of the year – until March 31, 2022 – the relief is cut to 66%.
So there you have it, HomeHero’s guide to what the Chancellor’s 2021 Budget means for Landlords and Letting Agents.
Time for another? Head to our Property Section for more articles.