The UK Mini Budget: Great News for International Property Investors

27^th September 2022

by Gordon Campbell

GDP Pound: Current Exchange Rate

For investors outside of the UK, this recent unrest can at first seem alarming. But it is not.

However, you are in the best possible position to make the most of the current climate of uncertainty.

With the pound falling, this means investing in foreign currencies will get you more for your money compared to in the past, as currencies such as the dollar or the euro will be worth more in comparison to the pound.

This means that you can invest for less money compared to before the pound began to fall, thanks to the falling value of the pound making UK investments comparatively cheaper.

This period will not last forever, as the UK’s political and economic instability will calm down over time and smooth over, returning the pound to values similar to the beginning of the year.

Therefore international investors need to make the most of this additional beneficial period of financial uncertainty whilst they can.

Unlike other sectors of the UK economy, the housing market is famously stable thanks to housing’s status as a physical asset, which sees value grow over time.

The UK has seen house prices rise at some of the fastest levels ever seen in 2022, as highlighted in a recent blog sent to you. http://allianceproperty-group.co.uk/items/news-section/Alliance-Property-Group-Market-Review-Q3-2022.

This means property investment is a good way to invest your money during periods of financial uncertainty, such as during inflation or a recession.

UK Mini Budget September 2022

From a stamp duty cut to measures to increase housing supply, here are 6 things landlords and investors need to know about the latest budget announcements.

The Chancellor, Kwasi Kwarteng, has presented a mini budget in advance of the normal autumn review, with measures to help promote growth during the cost of living challanges.

The measures aim to promote a "rate of growth of 2.5%", ushering in a "new approach for a new era," according to Kwarteng. Here are 6 things that letting agents and landlords need to know.

1. Stamp duty cut, effective immediately

The Chancellor announced a permanent cut to stamp duty thresholds, effective from 23 September 2022.

The cut raises the threshold of the price of a property before stamp duty is paid from £125,000 to £250,000.

First time buyers currently only start to pay stamp duty above £300,000, and this limit will jump to £425,000.

He also announced that "increase the value of the property on which first-time buyers can claim relief, from £500,000 to £625,000." This means that, overall, an additional 200,000 people will not pay stamp duty on their housing purchases. 

This tax cut will help investors buying a property as their main residence.

Investment/second home property purchases do not qualify for the Stamp Duty reduction.

2. Measures to increase housing supply

The government has announced that it will increase sales of surplus government land to build new homes.

On top of this, it plans to streamline the planning system and its processes, bringing forward a new bill to "unpick" the EU laws that "constrain growth".

“Cuts to stamp duty will get the housing market moving and support first-time buyers to put down roots," says Kwarteng. "New Investment Zones will bring business investment and release land for new homes in communities across the country."

3. National Insurance contributions increase scrapped

National Insurance payments were increased in April 2022 by 1.25%.

This would have been reversed in April 2023, replaced by a health and Social Care Levy. It will now be reversed earlier than planned, on 6 November 2022, and the levy will be cancelled.

This is expected to save individuals an extra £330 on average next year, while 920,000 businesses will save £10,000 on average in 2023, including estate and letting agents.

Corporation Tax increase cancelled

The planned increase of corporation tax from 19% to 25% will be cancelled - making it the lowest rate of corporation tax in the G20.

This will be a boon to any limited company landlords, especially as reports show that this way of operating is growing in popularity due to the tax efficiencies it can offer for higher rate taxpayers.

6. Highest rate of income tax to be abolished

The Chancellor shared that the highest rate of income tax at 45% for earnings over £150,000 will be abolished.

The government will also cut income tax to 19% - or 19p on the pound - in April 2023 - a year earlier than planned, to make the UK's tax system "one of the most competitive and progressive" in the world.

7. Energy price support

The Chancellor reiterated the previously announced support during the cost of living crisis, including the price cap guarantee for consumers, limiting the unit price that consumers pay for electricity and gas at £2,500, on top of the £400 payment to all households and additional payments to vulnerable households.

The Energy Bill Relief Scheme also includes additional support for businesses, equivalent to the price guarantee provided to households.

Summary

In a blog sent out recently, Is Now a Good Time to Buy Property?, the same message remains the same today.

Yes, it is a great time to invest as a landlord.

Whenever you are ready to talk about your property investing goals, send us an email and we can arrange to set up a call.

Alliance Property Group. Making a Difference

Thank you for reading

This blog is intended as a guide only and does not constitute legal advice.