The Spring Statement – was there good news for landlords?

When the Chancellor stepped up to deliver his Spring Statement, he opened with two key announcements about the economy:

1. The predicted 6% economic growth for this year had been cut back to 3.8%, and
2. Inflation, forecasted last year to be around 4% in 2022, is actually expected to be 7.5% – more than three times the Government’s 2% target.

That’s quite a switch from the outlook at the Autumn Budget last October. Back then, it seemed as though 2022 was going to be a great year:

• Lockdowns and restrictions were set to end
• The UK economy was forecast to grow at 6%
• Unemployment was at one of its lowest ever rates
• Job vacancies were at their highest for some time
• Wages were increasing faster than inflation

What position are landlords in right now?

As a landlord, you’ll have seen the cost of your own energy and food bills rise quite dramatically over the last few months – as will your tenants - and they’re going to increase further this year. Landlords renovating properties will also have seen how much the price of materials has gone up, not to mention rising labour costs. So your day-to-day business and future outlook will both have already been affected by global events.

On the flip-side, rents have risen at record rates in most areas, particularly in the case of houses. This has been down to the current chronic shortage of properties to rent, which has been exacerbated by government efforts to curb the growth of buy to let. So you may well have benefitted from higher monthly profits and you’re also likely to have seen the capital value of your property increase well over the course of the last two years, or in the run up to COVID.

So the positive thing is that the value of your investment might be just about keeping up with the cost of living. However, with continued rising costs, the big question is: what help and support did the Chancellor announce in the this mini-budget that could be good news for you as a landlord moving forward?

Boosts to net income

Support for net income comes in two forms - both effective from April this year:

1. Raising the National Insurance threshold. This has gone up by £3,000, bringing it into line with the personal allowance of £12,750, which could give some up to £330 more in your pocket each year.
2. Doubling the Household Support Fund. This is a fund that local councils can dip into to help vulnerable people struggling with the increased cost of living. It has now been doubled, rising from £500bn to £1bn.

Both of these are incredibly helpful to people on a low income, especially those who won’t now have to pay any NI at all – avoiding the impact of the higher 1.25% rate coming into effect from April. And for your tenants, it should help them continue to be able to afford their rent.

There was also good news for the future, as Rishi Sunak announced he intends to cut the basic rate of income tax from 20p to 19p in 2024 – that’s within this parliament – which will boost both your and your tenants’ finances, even if it’s still a few years away.

Support for energy cost rises

The Government already had a couple of support measures in place before this ‘mini-budget’:

• People living in properties in band ‘D’ will get a £150 council tax rebate in April
• Those on low incomes can receive energy efficiency upgrades to help cut their bills.

But what more is being done to offset rising home energy bills and ‘price at the pump’ costs?

There were two key announcements from the Chancellor:

1. Fuel rates would be cut by 5p per litre, effective from 6pm that evening (23^rd March). While this might not seem like much of a reduction, given that we’re continuing to see prices rocketing on the forecourt, at least it’s something of a help to drivers, especially those who have to travel for work.

2. A temporary zero rate of VAT on the installation of energy saving measures. From 1^st April 2022 until 31^st March 2027, you won’t have to pay any VAT on energy efficiency improvements, such as solar panels, insulation and heat pumps. And that will help offset some of the other rising costs for landlords who need to upgrade their properties from an EPC rating of ‘E’ to meet the proposed rating of ‘C’ in the future. (Alex – worth linking to one of the articles we’ve done on this)

Other announcements…

Although it’s not directly related to property, the Chancellor also announced various support measures for those who run their own business, including:

• improvements to the employment allowance
• help with business rates for those in retail, hospitality and leisure
• support for education and investment in software.

And it’s important to understand the overall performance of the economy, which forms the backdrop to the Spring Statement, as it’s typically strongly linked to the performance of the property market. There are three key positive take-aways:

1. Although the Office of Budget Responsibility has reduced the economic growth forecast from 6% to 3.8%, that’s still pretty good compared to the long-term average of just under 2%.
2. Unemployment is expected to fall even lower than the current 3.9%
3. The Chancellor has forecasted that over the coming years we will continue to pay down the huge debts incurred to support the country through the pandemic.

So, was this Spring Statement good news for landlords?

Despite rumours that the additional rate of Stamp Duty Land Tax for second homes and buy to lets might be increased from 3% to 4% (to bring England in line with Scotland and Wales), this didn’t happen.

And although there weren’t any huge giveaways, the Chancellor did at least announce some support to cover the increased cost of living for both tenants and landlords. Add to that the scrapping of VAT on energy saving materials for the next 5 years and we can consider this a fairly good mini-budget for landlords overall.

If you have any queries about your own rents, property values or lettings in general, just get in touch with your local Your Move letting agents and speak one of the team.