Agents, landlords and tenants alike tuned in to watch the Chancellor, Rishi Sunak, unveil his Spring Budget 2021 plans. We have summarised all the main points that specifically affect the housing market, so that agents can make note on the changes and plan their business accordingly. See the full plan on GOV.UK.
Was Capital Gains Tax mentioned in the Budget 2021?
The Chancellor made a quick mention of Capital Gains Tax in the Budget. He announced that the the annual tax-free allowance before paying Capital Gains Tax, also known as the Annual Exempt Amount (AEA), will be frozen at their existing thresholds until April 2026. This has been accompanied also by a freezing of the inheritance tax thresholds and the pensions Lifetime Allowance.
Many were worried that we would see an increase to the CGT rate on buy-to-let properties, from the current 18% for basic-rate taxpayers, and 28% for additional rate tax-payers. Buy-to-let landlords may have breathed a sigh of relief, but we can't speak too quickly. While the Chancellor didn't mention any rises on the tax rate for capital gains in the Budget 2021, there are still rumours that an increase in line with income tax will be announced soon.
In 2023, corporation tax will be raised to 25%. However, this will come into effect well after it's expected that the economy will return to pre-pandemic levels. For small businesses, a small profits rate will be introduced for companies with profits of £50,000 or less, as they will continue to pay corporation tax at 19%.
The Stamp Duty holiday will be extended to September
The Stamp Duty holiday as it currently stands (properties up to £500,000) will end on 30th June 2021 in England and Northern Ireland. This holiday has helped to prop up the housing industry, as almost 9 in 10 properties have been exempted from stamp duty.
To transition back to its original threshold and mitigate a 'cliff edge' deadline, from 1 July 2021, buyers only start paying stamp duty with properties over £250,000, before returning to £125,000 on 1 October 2021.
Launch of a 95% mortgage guarantee policy
Rishi Sunak announced that he "wants to turn Generation Rent into Generation Buy"; doing so with the launch of a 95% mortgage guarantee scheme, in which buyers put down just 5% of the property’s cost as a deposit.
This scheme begins in April 2021, to hopefully give renters and first-time buyers (although all buyers are included) the opportunity to buy without the need for an expensive upfront deposit, so long as the property costs up to £600,000. All buyers will also be able to fix their initial mortgage rate for at least five years. Many big lenders are already backing the scheme, Rishi Sunak announced.
The scheme will be available for new mortgages until 31 December 2022.
The Furlough scheme is extended to September: what does this mean for your tenants?
The furlough scheme or the Coronavirus Job Retention Scheme, which pays up to 80% of wages, will be extended until the end of September. From July 2021, the government will introduce an employer contribution for the cost of unworked hours: 10% in July, 20% in August and 20% in September. Furlough has already protected more than 11 million jobs since March 2020.
The grant for self-employed workers (the Self-employment income support scheme) will also continue up until September with two further grants. Applications for the 4th grant will open in April, and crucially will be eligible for 600,000 more newly self-employed workers. The 5th grant will cover May-September.
The Chancellor will also be extending the £20-per-week uplift to Universal Credit for six months.
Does your tenant referencing take furlough into account?
The Chancellor's Budget plan has given agents some time to prepare for when furlough does come to an end. It's vital that agents consider furlough's end date, and the effect it may have on rent payments.
With RentProfile Referencing we make sure to take all government changes – including furlough and any other government support that tenants receive – into account for each tenant. From this we advise whether the landlord should continue to rent out their property to the tenant with or without a guarantor. We also provide a Rent Guarantee product for agents, so you can ensure that your landlords will receive rent payments for up to 12 months.
Disclaimer: This blog post is intended for general information purposes and should not be construed as legal advice or official guidance.