Budget 2021

The Budget – Positive News for the Property Market

If the property market in the UK needed a boost, it certainly got it with Rishi Sunak’s March budget.  It’s fair to say that sales and lettings agents have been lucky over the past year; being able to continue to do business throughout the last two lockdowns has kept them going.  However, the three major announcements from the Chancellor of the Exchequer brought welcomes news to many in the property industry which were:

·       An extension of the stamp duty holiday until 30^th June, then tapered until 30^th September 2021.

·       A government-backed mortgage scheme of 95% mortgages up to £600,000.

·       Business rates holiday extended to 30^th June, then 75% discount until 30^th September 2021

Stamp duty holiday extended

Widely anticipated by many, Rishi Sunak confirmed that the stamp duty holiday is being extended until 30^th June.  In addition, to ‘soften the blow’ of returning back to normal, it will continue for house sales up to £250,000 until 30^th September 2021. 

The stamp duty holiday, introduced in July 2020 in England and Northern Ireland, enabled those who were buying a property at £500,000 or less to save as much as £15,000 on their transaction.  It is believed there are currently an estimated 628,000 house sales going through the legal process in the UK, including sales agreed in 2020 that still have not completed.

Without doubt, the stamp duty relief sustained the property industry.  The extension to 30^th June means that many of those buyers can breathe a sigh of relief and potentially benefit from the stamp duty holiday.  However, people that have yet to agree a sale on their property or haven’t put their property on the market as yet, the race is back on. 

The added bonus to the Chancellor’s announcement of a transition period before stamp duty returns to its normal threshold of £125,000 eased the worries of many first time buyers.  From 1^st July 2021, the zero stamp duty threshold will be set at £250,000 until the 30^th September 2021.

However, with the average period for an agreed house sale to complete now taking 110-115 days, it’s quite likely that many will miss the 30^th June deadline.  The main reason for the increase in how long the legal process takes is the rise of 47% in the number of property sales agreed in the second half of 2020.  Those who are putting their property on the market now should be cautious in factoring in the maximum stamp duty relief and instead, focus on the reduced tax relief that’s in place until 30^th September.

This announcement will not only benefit property buyers and sellers, it will also help landlords looking to increase their property portfolio.  Indeed, it is also a boost for first-time buy-to-let property investors. 

New mortgage guarantee schemes

Remember the Help to Buy scheme that finished in 2016?  The Chancellor’s new mortgage guarantee scheme looks set to replace it.  The announcement of a 95% loan to value (LTV) mortgage guarantee scheme, designed to help buyers that only have a small deposit to buy a house, was welcomed. 

Due to launch in April 2021, house buyers will have the opportunity of purchasing a home with just a 5% deposit.  Up to a price limit of £600,000 and with the backing of major lenders, such as HSBC, Lloyds, Barclays and Santander, the low deposit mortgage is back. 

The scheme is particularly relevant to first time buyers who often struggle to raise the necessary 10-15% deposit to buy their first home.  Rightmove currently have 86% of properties listed on their site with an asking price of £600,000 or less, it is welcome news to many including first-time property investors.

This works with the government guaranteeing to repay the lender a proportion of their losses should the mortgagee default on their repayments.  In return, lenders are required to sell 95% mortgages, i.e. 95% of the sale price of the property with the purchaser providing a 5% deposit.

Rishi Sunak said in his Budget speech that he “wants to turn Generation Rent into Generation Buy.”

Business rates holiday

With the announcement of a 100% business rates holiday being extended until 30^th June, many sales and lettings agents are sitting more comfortably.  The added benefit of business rates being discounted by as much as 75% thereafter, up to a maximum of £2 million, is good news.  Whilst many agents continued to work, they were ‘closed’ to the public, particularly on local high streets. 

In addition, a freeze on VAT, keeping it at 12.5%, until September 2021 and inheritance tax until 2025/26 will also give the property market a boost.  As yet there is no announcement on Capital Gains Tax but this is probably due to the proposed radical changes that are the subject of extensive consultation by the government.  It is speculated that the government will release their ‘tax day’ proposals from 23^rd March.

A downside for landlords and property investors was the rise in Corporation Tax to 25% from April 2023.  Many landlords in the UK have brought their property portfolios under an umbrella as a limited company, called incorporations.  Buying a rental property as a limited company with the company owning the property allows landlords to offset their mortgage interest against their profits.  However, it also means their rental profits are subject to Corporation Tax instead of individual income tax.  A little bit of relief is the Chancellor explaining there will also be a change in how Corporation Tax is applied, particularly for smaller companies.  Whether this will affect the number of landlords and buy-to-let investors incorporating remains to be seen.

Overall, Rishi Sunak’s March 2021 Budget has been welcomed by the property market and certainly seen as a boost for many. 

Musker McIntyre is a leading independent, multi-faceted property agent in the heart of East Anglia, predominantly covering Norfolk and Suffolk.  They have a wealth of experience marketing a wide variety of properties with a proven track record as experts dealing in sales, lettings and property management.  Discover how Musker McIntyre can help you sell, buy, rent or let a property by contacting us for more details.