This information should not be interpreted as financial, tax or legal advice. Mortgage and loan rates are subject to change.
After taking over the position of Chancellor of the Exchequer, Jeremy Hunt presented his Autumn Statement in the House of Commons, on 17th of November 2022.
Key takeaways from the Autumn Statement
- Top 45% additional rate of income tax will be paid on incomes over £125,140, adjusted from £150,000
- Income tax personal allowance and higher rate thresholds frozen for two additional years, until April 2028
- Stamp duty land tax cuts will be phased out from 31st March 2025
- National insurance and inheritance tax thresholds frozen for an additional two years, until April 2028
- Tax-free allowance for dividend will be lowered from £2,000 to £1,000 and to £500 from April 2024
- Capital gains tax due to be cut next year from £12,300 to £6,000 and to £3,000 from April 2024
- Local councils in England will be able to raise council tax up to 5% a year without a local vote, up from 3%
- Temporary 45% tax on companies that generate electricity, to apply from January 2023
- Household energy price cap will be extended for an additional year, but at a higher cap - £3,000 a year, up from £2,500
- Inflation rate is expected to be 9.1% this year and fall to 7.4% next year.
Impact on landlords
Even though the Autumn Statement brought forward a considerable amount of changes, it does not contain any significant adjustments that would benefit landlords and the private rental sector (PRS).
According to the chief executive of the National Residential Landlords association, Ben Beadle, the Autumn Budget has missed the opportunity to provide an additional boost to the PRS. He says:
“The demand for private rented housing is massively outstripping supply. This will only worsen as growing mortgage rates make home ownership more difficult to afford.
“The Government has yet again failed to recognise the potential for housing to drive growth and deliver for the economy. The Chancellor should have focused on boosting supply by ending the Stamp Duty Levy on the purchase of new rental homes.
“Research by Capital Economics suggests that scrapping this could lead to a £10 billion boost to Treasury revenue. This would be as a result of increased income and corporation tax receipts. Instead, these swinging cuts to Capital Gains Tax allowances will dissuade investment for years to come.
“The last thing renters need is an effective further tax hike on the private rented. All this will do is discourage investment in the new homes to rent the country desperately needs and drive up the cost of renting.”
Multiple real estate agencies have reported that demand has been outstripping supply in the rented housing market. The demand for private rented housing has risen by 142 percent, compared to the five year average, all the while supply has retracted by 46 percent.
The change to Capital Gains Tax may impact landlords looking to sell property.
However, as house prices are predicted to fall, according to the Office for Budget Responsibility, so this could swing towards a buyers’ market, which could favour landlords looking to expand their portfolios.
The significance of the statement
There are several upcoming difficulties in the UK economy, which the Autumn Statement will make an attempt to rectify, with the aim to stabilise the UK economy and its markets.
The Autumn Statement is following up former Chancellor Kwasi Kwarteng’s mini-budget announcement, which received a negative reception and caused turmoil in the UK markets and fall in the value of the pound.
As soon as Hunt was put onto the role of Chancellor, he reversed Kwarteng’s plan to make £32 billion tax cuts.
The government is aiming not to spend more than it collects via taxes, by the financial year of 2026-2027. Speaking prior to today’s announcement, the Chancellor warned the public it would not be easy to get the economy back on track, stating:
“Decisions of eye-watering difficulty lie ahead.”
The Bank of England previously stated that the UK is facing a prolonged recession – expected to last through 2023 and at least the first quarter of 2024, the longest since records began.
Moreover, several experts state that the public finances have a “black hole” of almost £40 billion. The likely avenue to reduce this was inevitably going to be via tax rises and cuts in spending.
Government’s “black hole”
The government raises money in order to fund its spending, by borrowing on financial markets via bonds.
The label “black hole” comes from the fact that the government has to find the extra money from self-imposed target in the future.