Autumn Budget 2022 – What Do Property Investors Need to Know?

With all the chaos of the UK political landscape over the past few months, keeping up with the government’s economic plans has proven hectic.

Last week, the new Chancellor Jeremy Hunt unveiled the entire Autumn Budget in a statement, outlining his plans for the UK economy moving forward. This replaces the older mini-budget he implemented when initially named Chancellor.

There are several changes that will affect the UK property market, and these are understandably aspects that property investors should take an interest in.

The Budget is a sweeping statement that covers every aspect of the UK economy, so trawling through it can be a hassle, and making sense of how it affects the property market may be confusing.

That’s why we have put together this guide, which gives you a basic summary of some of the most important changes coming, as well as what is likely to affect the property market and how.

There are several major changes set to be implemented by the government in the new Autumn Budget, including:

• The economy is set to grow by 4.2% this year, but the UK is already in recession, mainly due to rising energy prices.
• Borrowing will be about 7.1% of GDP in the current financial year, which in real-world terms comes to about £177bn.
• There will be a range of tax cuts and freezes, including an additional two-year freeze on income tax and inheritance tax which will take the freeze until 2028.
• Government spending will increase for five years but at a slower pace.
• Foreign spending will remain at 0.5% of GDP for the remainder of the forecast period, but the government remains fully committed to Cop26.
• The school’s budget will increase by an extra £2.3bn per year, while social care will see a two-year rise of £2.7bn and the NHS will receive an extra £3.3bn in funding.

This is a very brief summary of some of the major points that have emerged from the Budget, but what does this mean for property investors?

There are three major factors of the Autumn Budget which we think will impact property investors and the housing market the most in the coming years.

One of the more popular additions to Kwasi Kwarteng’s heavily criticised mini-budget was a cut to the stamp duty land tax that homeowners must pay when purchasing property.

First-time buyers will not need to pay any tax on property worth up to £425,000, while those who already own property will not need to pay any on property worth £250,000 or less.

This change was well-received as it encouraged homeowners and new buyers to purchase property at a time when many experts were predicting that the housing market was due to slow down as a result of the cost of living crisis.

Due to the popularity of this cut and the expected slowing of the growth in the housing market, Jeremy Hunt decided to maintain this lower level of stamp duty, but only for a limited period of time.

The current rate of stamp duty land tax will only remain in place until April 2025, at which point it will revert to previous levels, which saw a lower limit for tax-free property.

This will encourage growth for the property market and means investors now have a ticking clock to make the most of the reduced rates of stamp duty.

This suggests that those wanting to save money when buying investment properties should act fast to avoid additional taxes on property.

The disastrous reception of the mini-budget in September caused the GBP to fall to its lowest-ever value against the US Dollar, as many lost faith in the government due to the political turmoil and widely-criticised economic policies.

While the Pound is slowly recovering from this nosedive, the government’s current predictions indicate that due to the recession the UK is in the early stages of, the GDP will fall by 1.4% in 2023.

This decrease is only set to be temporary, with estimates indicating it will again rise by 1.3% in 2024 and by 2.6% in 2025.

While there is not a direct correlation between the UK’s GDP and the value of the GBP, it is reasonable to assume that the value of the Pound will be affected by this slight dip in the GDP.

For investors, this means that the UK economy as a whole will go through a period of weakness and instability before coming out the other side. This is likely to cause the housing market to experience a cooling period from the astronomical price rises of the past 12 months.

If the Pound falls in value, if not to the extent that it did earlier in 2022, then it puts foreign investors in a better position to invest in UK property, as they will be able to make the most of the lower value to get more for their money.

The government is set to increase tax revenues to help deal with the recession and generate more funds, and how these tax rises will be implemented will affect how much investors can earn from properties that they’re considering selling.

The biggest tax that property investors should be concerned with is the changes to Capital Gains Tax, which is the tax you pay on something that has increased in value when you sell it.

The new Budget will see the Capital Gains Tax allowance slashed from £12,300 to £6,000 as of April 2023, followed by a further cut to £3000 in April 2024.

For property investors, this means when you sell an investment property you will need to pay tax on a higher portion of the profit you make.

This gives investors a short amount of time to make the most of capital appreciation and sell any investment properties they are considering moving on from before the tax hits in less than six months’ time.

Considering the increase in taxes for investors, it may be best to hold onto any properties in your portfolio for now if possible while the UK recovers from recession, and only sell the properties if this higher rate of Capital Gains Tax is reduced.

All in all, the latest Autumn Budget is encouraging for those looking to invest in property in the UK right now. If you want to make savings on stamp duty tax, or purchase property for a lower rate if you’re an overseas buyer, now is the time to invest.

We have a number of fantastic deals currently available for investors, with below-market value property prices and affordable deposits available. Our latest investment opportunity, Vantage Point, offers attractive 7% rental returns that are not to be missed.

If you want to keep up with the latest goings on in the UK property market, and how major events such as the Autumn Budget will affect it, be sure to keep an eye on our property blogs.