How will the estimated UK government Budget release affect the property investment industry?
If you have been reading the news lately you will no doubt have seen the controversies surrounding Boris Johnson and Sajid Javid's proposition to introduce a so-called Mansion Tax in the UK. This would see homeowners who own high-end properties paying additional taxes.
This suggestion has been met with backlash by Johnson's own party and grassroots supporters as the Tories called for it to be thrown out. Amidst this opposition, Sajid Javid has resigned as Chancellor and subsequently been replaced in a cabinet reshuffle, by Rishi Sunak. All of this has occurred a mere month before the latest UK government Budget is to be announced which will be the first Budget officially declared since October 2018; sixteen months ago. The Budget, set to be released on March 11th, will go ahead despite the unrest within the Tory cabinet and is rumoured to contain changes to taxes in the UK, most specifically the alluded-to 3% increase in non-UK property buyers Stamp Duty Land Tax. Although the Budget specifics are unlikely to be released ahead of the official statement on March 11th, there are changes that are expected to be present in the Budget that will impact the pricing and taxes of property investment.
Despite over half of those surveyed calling for Stamp Duty Land Tax to be removed for buyers purchasing property under £500,000, it seems that in fact following the rejection of the Mansion Tax proposed, that Stamp Duty tax will likely increase. This comes as the purpose of the Mansion Tax was to assist with lowering Stamp Duty tax for first-time buyers.
Reasons for the Mansion Tax being rejected are seemingly associated with the tax disproportionately impacting London and South East homeowners that would then help pay for Johnson's election pledge to spend £100bn on infrastructure, with most of it located in the midlands and the North; rewarding those who voted for the conservatives in the general election in December 2019.
Although the new Budget is rumoured to include changes to tax, pensions, housing and social care, there is likely to be an increase in spending in the north of England which benefits areas such as Manchester significantly. The Royal Institute of Chartered Surveyors (RICS) recently reported that buyer demand across the UK is rising at it's fastest rate in more than four years. This is in addition to Rightmove UK's January period rising 2.7% and reaching it's highest for that period in twenty years. The Boris Bounce is speculated to carry on through to the summertime with political stability serving as a primary factor for the property industry experiencing a boom.
If the changes to Stamp Duty tax are announced on 11th March it is generally accepted that all official proceedings and exchanges will be impacted, unless completed before midnight on the night of the 11th. The press is advising to act in anticipation of these changes coming into effect ahead of the date and to ensure that your exchanges are completed before this date.
Aside from the changes to the taxes, the proposed cash injection into the northern powerhouse is great news for the north-west buy to let property investment market as it will see investors receive higher ROIs and more residents flocking to the north.