Chancellor’s Autumn Statement – what did it mean for lettings?

In his first major fiscal address as Chancellor, and Rishi Sunak’s first Autumn Statement as Prime Minister, the former Health and Foreign Secretary Jeremy Hunt laid out the government’s tax and spending plans.

And, as predicted, it included some large spending cuts and tax rises as the Chancellor sought to fill a £55 billion fiscal black hole.

He said he was delivering a plan designed to tackle the cost-of-living crisis and rebuild the UK economy, adding that he would be prioritising stability, growth and protecting public services.

While his speech was light on specific housing policy or vision, he did announce a number of measures that will have a direct impact on the lettings sector.

Here, we lay out what they were.

CGT tax-free allowance halved next year

Hunt announced that he would more than halve the tax-free allowance for capital gains in the next tax year (2023-24) from £12,300 to £6,000. It will then be halved again to £3,000 in 2024-25. The Chancellor explained this was in order to make the tax system fairer and restore the public finances.

Those landlords looking to sell their home will be most affected by this change, as capital gains tax is charged at a much higher rate for residential property sales.

As a result, more landlords could look to exit the sector sooner to make sure they aren’t hit by the change. That would, of course, have a knock-on effect on rental supply, which is already low.

“These swingeing cuts to Capital Gains Tax allowances will dissuade investment for years to come,” was the verdict of Ben Beadle, CEO of landlord trade body NRLA, adding that it will deter investment in new rental homes and increase the cost of renting.

Higher earners to face more tax

The Chancellor also revealed in his speech that higher earners will start paying the top rate of tax (45%) when they earn £125,140. Previously, they wouldn’t start paying this rate until they started earning £150,000.

This could see more landlords being dragged into the highest paying tax bracket, which will then have an impact on the profits they can make because of the changes to mortgage interest tax relief (phased in from April 2017).

There were other tax changes, too, with Hunt announcing that Inheritance Tax thresholds will be frozen for the next two years, which will mean hundreds of thousands of home owners remain subject to paying this tax.

Time-limited stamp duty cut

In a measure that hadn’t been trailed beforehand, unlike many of the other things he announced, the Chancellor said the recent cuts to stamp duty would be time-limited, coming to an end on March 31 2025.

This means, for the next few years, there is effectively another stamp duty holiday – which could encourage more buyers, including landlords, to take advantage of the savings.

In his now infamous mini-Budget, Kwarteng increased the nil rate threshold for stamp duty from £125,000 to £250,000. He also upped the threshold at which first-time buyers pay stamp duty on their first home to £425,000 from £300,000 on purchases worth up to £625,000.

The Treasury confirmed the move in a tweet shortly after Hunt’s announcement, saying the reductions would cease by the end of March 2025. “This is to help the jobs & firms that rely on the housing market through the current challenges, while strengthening the public finances,” it added.

The above points were the main areas of consequence for landlords, but Hunt’s wide-ranging speech included a number of other measures – ranging from electric cars to the energy price guarantee, which are explained in much greater detail here

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Published on 25/11/2022