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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:
1 | Landlords Avoid Buy-to-Let Stamp Duty Increase
The chancellor has once again refrained from increasing the stamp duty surcharge for landlords and second homeowners. Fears that it might be increased stemmed from a document that was released after last year’s Autumn Budget. The document had unwittingly left in a statement says that the stamp duty surcharge had been increased to four percent.
When pushed on why this line was in the document, it was revealed that the chancellor decided to scrap the stamp duty surcharge increase in the immediate hours before budget’s release. This led property investors to believe that the surcharge could be moved up to 4% in the Spring Budget.
Fortunately for landlords the Chancellor has not moved forwards with these plans. At least up until August’s Budget the 3% surcharge will remain as it is.
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.
Although there is a limited change to the position of landlords, this spring statement should be viewed positively. First and foremost, the avoidance of an increase in the additional homes stamp duty surcharge is excellent news. Even a 1% increase in stamp duty would have a significant impact on landlords’ profits. However, we would advise investors to prepare for an increase in the future. If you are considering purchasing a buy to let property it might be worth doing it sooner rather than later to avoid potential tax hikes.
With regard to the VAT cut for green energy improvements, we would again advise landlords to make use of this tax break quickly. With the minimum EPC standard being increased to C for all new tenancies, many landlords could be left flat-footed. It would be wise to start making energy improvements slowly, so you are not left with void periods when the regulation changes in 2025. Staggering improvements over the next 2 years could help spread out the financial burden of making these changes and leave your buy to let compliant.
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