Autumn Statement 2022 – Impact on property sector

The Chancellor – Jeremy Hunt – stated that although Brexit is having an impact, the UK is one of many countries tackling the financial aftermath of Covid 19, international inflation and the side-effects of the war in Ukraine.

However, there were many announcements affecting property investors, owners and tenants. The most relevant include:

HALVING THE CAPITAL GAINS TAX ANNUAL EXEMPTION

... from £12,300 to £6,000 in 2023-24 and again to £3,000 in 2024-25. This is obviously a hit for landlords in particular.

Conversely, however, those investors wishing to expand portfolios and not influenced by the stricter CGT allowances (which are modest when set against recent capital appreciation) will at least have the prospect of more properties available to buy should other landlords sell.

DIVIDENT ALLOWANCE WILL BE CUT

... from £2,000 to £1,000 next year and then to £500 from April 2024. Again this is likely to hit some landlords and may prompt further sales.

STAMP DUTY CUTS

... announced in September will remain – for now.   This reduced stamp duty will remain in place but only until March 31 2025. The upside of this is that the housing market will benefit from this incentive for some two and a half years.

There are two other property-related measures which, at least indirectly, have a bearing on investments and the housing market. These are:

LOCAL AUTHORITIES CAN RAISE COUNCIL TAX

... by five per cent without holding a referendum (that is three per cent, plus an additional two per cent if they have social care responsibilities). In London, where council taxes are amongst the highest in the UK, this will be another burden on residents' ability to pay.

INHERITANCE TAX THREASHOLDS

... are to be frozen for an extra two years, making hundreds of thousands of home owners liable to IHT. The threshold currently stands at £325,000 with a further residential nil rate band set at £175,000.

The absence of an OBR forecast in the September fiscal event spooked the markets at the time; the details of the one released now will be only slightly more comforting. It says Britain’s economy is already in recession and set to shrink by 1.4 per cent next year, largely because of the soaring cost of living, with an estimated 500,000 set to lose their jobs and UK national debt being some £400 billion higher than forecast in March.

HOUSE PRICES

... The independent Office for Budget Responsibility (OBR)  forecasts that house prices will fall by up to nine per cent between the fourth quarter of 2022 and the third quarter of 2024, largely driven by higher mortgage rates as well as the wider economic downturn.

There are a few glimmers of light to help offset damage to individual household incomes including longer-term help for energy bills from next April.

Read the full article at Benham & Reeves with more detail on the many announcements affecting property investors, owners and tenants.