November 2022 Budget update

What does today’s Budget mean for letting agents, and the private rented sector as a whole? 

The government has put together a £55bn package of tax increases and spending cuts aimed at reassuring the markets after the turmoil unleashed by September’s mini-budget, while also providing some extra targeted support. Here are some of the key takeaways:

• Minimum wage is rising to £10.42 per hour, an increase of just under 10%, helping affordability at the budget end of the rental market. The government is also raising benefits and pensions in line with inflation from April (a 10.1% rise) and making one-off payments to people claiming some state benefits, including Universal Credit. Around 8 million households will receive up to £1,100.
• However, pressure on many tenants’ finances will increase. While energy prices will be capped until April 2024, the average amount paid will increase to £3,000 per year from April. Rents are also likely to go up as landlords pass on their increased costs to tenants – especially if more landlords quit the sector.
• Local councils will be allowed to increase council tax by up to 5% without needing to call and win a referendum, up from 2.99% currently. Landlords who include council tax in the rent, usually those letting out houses in multiple occupation (HMOs), may need to raise rent to cover tax increases. Where tenants pay council tax themselves, this could reduce their ability to afford rent.
• The Capital Gains Tax annual exemption will be halved to £6,000 in 2023 and again to £3,000 in 2024. This will mean that landlords face bigger tax bills when they choose to sell, but could also encourage them to hold onto properties – potentially slowing the rate at which they are leaving the sector.
• The threshold for inheritance tax will be frozen for two additional years. The threshold had already been frozen until 2025/26, but will now stay put until 2027/28. 
• Income tax thresholds are also being frozen, and the top 45% additional rate will kick in at an income of £125,140, down from £150,000. High-earning landlords and letting agents will see their tax bills go up, and rapid wage and rent growth will push more into the higher rate (£50,271 and over) – even though it may be a real-terms pay cut with inflation running high.
• The dividend allowance will be cut from £2,000 to £1,000 in 2023, and then to £500 in 2024. Landlords who own their properties through a limited company will have to pay more tax if they pay themselves in dividends.
• Properties will be revalued for business rates, and the government will provide a £13.6bn business rates support package. Chancellor Jeremy Hunt pledged that two thirds of properties “won’t pay a penny” – potentially including high street estate and letting agency branches.
• In the medium term, the government is betting that this Budget will calm the markets, tame inflation and limit interest rate rises. If they’re right, a more stable economy could allow the housing market to recover again.

Other finance headlines

Higher taxes proposed for short lets and holiday properties – Landlord Today

BTL mortgage rates expected to improve – Commercial Trust

Barclays pilots £2,000 cashback scheme for green improvements – Mortgage Solutions