In today’s highly-anticipated Budget, Chancellor Rishi Sunak outlined several measures to continue supporting the economy through the coronavirus crisis.
As could be expected, housing policies were at the forefront, with Sunak announcing a three-month extension to the stamp duty holiday, as well as a 95% mortgage guarantee scheme for property buyers.
Meanwhile, the furlough scheme and business rates relief for the retail, hospitality and leisure sectors have been extended until the end of September.
And while the rumoured property tax reform to help close the Covid spending deficit didn’t come to pass, tax changes are still expected, with details likely to be announced as soon as March 23 – dubbed ‘tax day’.
Below, we provide a breakdown of the key Budget measures and what they mean for property buyers, sellers and landlords.
Extension to stamp duty holiday
Following considerable pressure from the public, property professionals and politicians, the Chancellor has extended the stamp duty holiday from March 31 to June 30.
From July 1, the holiday will apply only on properties up to £250,000 until the end of September. This means that the pre-Covid stamp duty thresholds will not resume until October 1.
People purchasing property until June 30 can still benefit from savings of up to £15,000. After this date until the end of September, the maximum stamp duty saving available will be reduced to £2,500.
Currently, no details have been provided on whether these dates will end with the dreaded ‘cliff-edge’ or will be tapered to avoid a last-minute disappointment for some buyers.
As part of his announcement, Sunak said the holiday ‘has helped hundreds of thousands of people buy a home and supported the economy at a critical time’, but due to the sheer volume of transactions, many new purchases won’t complete in time for the end of March.
With the extension now confirmed, many property purchasers will benefit from additional tax savings, helping to stimulate the housing market for the rest of the year.
Figures from Rightmove suggest 45% of all properties will still be exempt once the stamp duty threshold is reduced from £500,000 to £250,00 from July to the end of September.
It says the average stamp duty saving in England is £5,803, although this figure could be much higher in expensive areas such as London, with some saving as much as £15,000.
Capital Gains Tax changes yet to be confirmed
There was much speculation that the Chancellor would increase property taxes in order to close the Covid spending gap.
One of the main rumours was a hike in Capital Gains Tax (CGT), which affects a relatively small number of people while bringing in a large amount of tax revenue for the Treasury.
It was believed the rates would be doubled or brought closer to income tax rates with the aim of netting the Treasury an additional £14 billion each year.
While there was no announcement on Capital Gains Tax, it is likely this will be the subject of thorough consultation on radical changes, beginning on March 23 with the release of the ‘tax day’ proposals.
Landlords who have incorporated will be disappointed to know that the rate of Corporation Tax will rise from 19% to 25% in April 2023, but with protections for smaller businesses.
Despite the increase in Corporation Tax and impending rise of CGT rates, property still remains an attractive long-term investment for landlords, particularly those with a reputable letting agent on hand to protect their rental income.
Additional Budget policies
The Chancellor also confirmed that there will be government-guaranteed 95% mortgage loans available for buyers purchasing properties up to £600,000. However, this is thought not to apply to investment purchases.
Outside of property, the furlough scheme has been extended until the end of September, with higher employer contributions from July. Business rates relief for retail, hospitality and leisure sectors will also continue from April until June.
Regarding the economy, Sunak said it should return to pre-Covid levels more quickly than previously thought, by mid-2022. But by 2026, the economy will be 3% smaller than it would have been without Covid.
The government says it has already provided £280 billion of support since the start of the pandemic. Despite this, 700,000 jobs have been lost and the economy has shrunk by 10%.
And while GDP is expected to grow by 4% this year, Sunak remarked: “It’s going to take this country, and the whole world, a long time to recover from this extraordinary situation.”
For more information about the Budget and what this means if you’re selling or letting a property, please get in contact with us at Key Property Consultants. We will do all we can to help you complete your property transaction while adhering to all the latest Covid guidelines.
To find out more about what we can do for you across South East London, get in touch with us on 0203 793 2033 or email us at firstname.lastname@example.org. You can also find out more about our services here.
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