In today’s Autumn Statement, Chancellor Jeremy Hunt laid out his plans to boost economic growth and, arguably, the Conservative Party’s position ahead of next year’s general election. What key announcements were made, and what do these mean for landlords?
The past year has seen plenty of change and volatility in the UK economy. Today’s highly anticipated Autumn Statement marks the return of confidence in the money markets, and many had been hoping to see Hunt make some key tax cuts.
We know what landlords had been hoping to hear from the Chancellor, but what was announced, and what does it mean for your property investments?
Cuts to National Insurance
Despite recently telling Bloomberg TV that now “isn’t the right time for big tax cuts”, the key takeaway from today’s statement is the cut to National Insurance from 12% to 10%. For those earning between £12,750 to £50,200, this cut will save the average earner on £35,000 more than £450 a year.
The cuts to National Insurance come as part of the Conservatives’ overarching plans to incentivise more people into full-time work and will take effect from January 6th, 2024. Many economic experts had been apprehensive about the impact of inflation; however, as set out in today’s statement, this is to be offset by the changes to welfare payments.
Self-employed workers will also see significant cuts to their taxes. Hunt hailed the self-employed workforce as the people who “kept our country running during the pandemic”. Today’s statement saw Class Two national insurance abolished altogether, saving the average self-employed person £192 a year. He went on to cut Class Four National Insurance by one percentage point to 8%, a further average annual saving of £350 from April for around two million people.
Local Housing Allowance
Following significant pressure from landlords and tenants to increase the Local Housing Allowances (LHA), which have remained unchanged since 2019 despite rents increasing significantly, Hunt announced that LHA would increase to a “30th percentile of local market rents”. By lifting the freeze on this benefit, 1.6 million households will receive an average of £800 more support for rent per year.
Planning Permission
The Chancellor noted that the current system for obtaining planning permission is not fit for purpose, so reforms will be taken to boost the number of new homes built. This will involve working through the backlog in Cambridge, London, and Leeds, and a further £450 million to Local Authority housing funds.
Hunt suggested that planning application fees would increase but that local planning departments would need to meet strict review deadlines to help speed up the process, or refund applicants.
Furthermore, for landlords looking to maximise their investments, these reforms will also introduce new permitted development rights to allow any house to be converted into two flats, provided the exterior remains unaffected.
Business rates and taxes
Jeremy Hunt is extending the 75% business rates discount for retail, hospitality and leisure businesses for another year and maintaining the freeze on the business rates multiplier for small businesses. According to the Chancellor, the two tax cuts “will save the average independent company over £12,800 next year.”
Hunt also announced he’ll make permanent the tax break which allows businesses to offset any investment, known as “full expensing”. Until today, this tax break was set to expire in 2026.
Three new investment zones
As expected, Jeremy Hunt named three new investment zones following the success of the 12 announced in the Spring. These zones are the West and East Midlands and Greater Manchester, and are expected to catalyse over £3 billion of private investment and around 65,000 new jobs in the areas.
With Manchester alone seeing annual rental growth of 14%, according to Zoopla’s latest Rental Market Report, these regions offer landlords a fantastic property investment opportunity. Many property investors plan to expand their portfolios in the new year, and there’s no doubt that with these regions now the focus for Government funding, the local rental markets will only become more competitive.
State Pensions
The Chancellor announced that the pension “triple-lock” will remain, meaning the basic state pension will increase by 8.5% from April 2024.
The “triple-lock” policy increases the state pension annually by the highest of annual inflation, average earnings growth, or 2.5%.
Although it was widely reported that Hunt was considering changes to this policy, the plans were widely criticised by the media and Conservative colleagues.
Welfare Payments and Low-Income Earners
Perhaps the most controversial announcements from today’s statement were surrounding Welfare funding. With around 100,000 people signed off from work annually with no requirement to look for employment, Jeremy Hunt announced his new ‘Back to Work’ plans. This scheme will reform the sick note system, providing people with treatment instead of time off. The goal is to help nearly 700,000 people with health conditions find work from home.
Those who haven’t found a job after 18 months will be given six more months before their benefit payments are cut off.
To help support workers on the lowest incomes, the National Living Wage will be increased by 9.8% to £11.44 per hour. This is worth up to £1,800 a year for a full-time earner.
There are several changes that the PRS had hoped to hear in today’s Statement that were missed, such as reviews of the Stamp Duty Land Tax surcharge and the removal of Mortgage Interest Relief. It’s positive to see that the Government is introducing new funding for the Housing Sector, but more needs to be done to support landlords. With so many relying on rental accommodation, incentivising new and existing landlords to invest in the sector is essential.
If you have any questions on how today’s Statement will impact your property investments or to discuss your property finance plans, contact our brokers on 0345 345 6788 or submit an enquiry here.
