Spring Budget 2022: 2 Key Takeaways for the Property Market

Spring Budget 2022

Towards the end of 2021, the UK economy was on a path of prosperity. Furlough ended with a record number of job vacancies, wages were increasing quicker than inflation and the economy was recovering fast.

Since then, things have taken an unexpected turn. Russia’s invasion of Ukraine has directly impacted many of the world’s largest economies, including that of the UK. Energy prices are increasing at a record pace and the cost of living is becoming more unsustainable. In fact, inflation is expected to reach 8.7% by Q4 2022 – the fastest rise in over 30 years. This will undoubtedly push many households to breaking point.

It is in the wake of these events that Rishi Sunak has delivered the UK government’s 2022 Spring Statement. As always, we wait eagerly to see what is being announced and how it is going to affect our landlords. There are two key takeaways for the property industry from the chancellor’s announcement:

2 | VAT Cut for Green Energy Improvements in Spring Budget

With energy prices rising at a record pace, the UK government has seen an opportunity to drive green energy changes in the country. The Chancellor has announced that the government would be cutting VAT on energy-saving materials from 5% to zero for the next five years. This will include almost all energy-saving materials from solar panels and heat pumps to wind and water turbines.

The move will be welcomed by many but should in particular be seen as a positive measure for landlords. With energy prices rocketing it would be wise for landlords to make their buy to let properties more energy efficient. This will save tenants money, increase their properties desirability and save money during void periods.

From 2025 the minimum energy efficiency standard is being increased to a C for all new tenancies. In 2028 this will be extended to all existing tenancies. With this in mind, landlords should be looking to the future and ensuring they are not left flat-footed when these regulation changes come into force. The green energy VAT break provides a perfect opportunity to reduce the costs of doing this.