What does the Spring Budget 2021 mean for landlords?

Posted 22/04/2021 by: Reeds Rains

Mother and daughter reading together

Before Rishi Sunak gave his Spring Budget, it was widely anticipated that Capital Gains Tax would be hiked for property and that income tax might also go up, in order to help fill the hole left in the public purse by the COVID-19 pandemic.

It had already been suggested that the Stamp Duty holiday in England would be extended and the Government would support lenders in requiring just a 5% deposit for mortgages on properties up to £600,000 – but there was more positive news from the Chancellor.

Here is a summary of some of the changes that could effect you as a new or existing landlord.

Purchase tax discount extended

The Stamp Duty holiday in England for property purchases under £500,000, which was due to come to an end on 31st March, has been extended until 30th June 2021. After that, the nil threshold will drop to £250,000 from July to September, before reverting to the ‘normal’ £125,000 thereafter.

So, as an investor, for purchases up to £500,000 until 30th June you will only have to pay the 3% higher rate that applies to additional properties. And from July to the end of September, it’s only 3% for the first £250,000.

Wales has also extended its temporary increase to the nil rate band of Land Transaction Tax until 30th June, but this doesn’t apply to additional homes.

These extensions take the pressure off buyers who currently have transactions underway and give other people another few months’ incentive to buy with a discounted purchase tax.

Investment in individual areas to help drive economic growth

When there is inward investment in an area that creates jobs and grows the local economy, that tends to lead to an increase in prices and rents.

As a landlord and investor, it’s always useful to know where and when new initiatives are being implemented. And in this budget, there were some specific announcements that should be of interest, whether you already have properties or are thinking of investing:

  • A UK infrastructure bank will be established in Leeds to help drive public/private investment projects
  • The Treasury’s new campus will be relocated to Darlington, as part of government plans to move 22,000 civil servants out of London by 2030
  • A £4.8 billion ‘Levelling Up Fund’ will be used to invest in “infrastructure that improves everyday life across the UK”  
  • Eight new “free ports” will be introduced in Teesside, the Humber, East Midlands Airport, Felixstowe and Harwich, Liverpool City Region, Plymouth, Solent and Thames. This should drive economic growth and help support the housing market in these areas
  • Two new offshore wind ports will be constructed in Teesside and the Humber, which should create around 3,000 new jobs each

Government support for 95% mortgages

When lenders withdrew high loan-to-value (LTV) mortgages last year, for fear prices would fall as a result of the pandemic, buyers who had managed to save a 5-10% deposit were effectively frozen out of the market. Now, to get those with smaller deposits moving again, the Government is going to guarantee that lenders won’t lose money if they lend at up to 95% LTV for properties worth up to £600,000. (Of course, mortgage customers must still be able to prove that they can afford the repayments at that level of borrowing.)

While landlords might worry that this means current tenants may now be able to move out of the rental sector, the reality from our perspective is that there is still plenty of demand and a general shortage of good-quality properties to rent, so you shouldn’t be adversely affected. If you do have any concerns, contact your local Reeds Rains branch to discuss your particular situation.

Income support: good news for those whose finances have taken a hit during the pandemic

If your tenant has been struggling to pay their rent, or you yourself are finding it hard to make ends meet at the moment, the following announcements should be good news:

  • The Furlough scheme has been extended to the end of September.
  • The self-employment income support scheme (SEISS) has been opened up to more individuals and extended to a fourth and fifth grant.
  • The £20-a-week increase in Universal Credit has been extended for six months.
  • The Minimum Wage will increase from £8.20 to £8.91 an hour from April.

Income Tax Personal Allowance frozen until 2026

People have got used to the threshold at which they start paying tax going up each year, to account for inflation. But this ‘personal allowance’ is to be frozen from 2022 until 2026 at £12,570, and the higher-rate tax threshold will stay at £50,270 during that time.

This effectively means incomes will fall in real terms, assuming the cost of living continues to rise. However, the UK does need to pay back the pandemic funding somehow and this means those earning more will make a greater contribution. It’s worth speaking to a financial adviser or property tax specialist to make sure you continue to realise profits from your rental property in the most tax-effective way.

As for Capital Gains Tax, Inheritance Tax and the lifetime pension allowance, there are no changes – for now. However, given that the Government did recently commission a review into Capital Gains Tax, we should expect that this may change in the near future.

We’re always here to help, so if you’d like to discuss any of the above, simply contact your local Reeds Rains branch and speak to one of the team.


YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

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