AUTUMN BUDGET STATEMENT 2023 AFFECT UK PROPERTY INVESTORS?
Tom Condon
November 29th, 2023
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The Autumn Budget Statement was announced on the 22nd November 2023 and acts as the mini budget after the Spring budget which took place earlier this year. They announced many different measures which aimed to lean the UK away from a recession.
Under the Autumn Budget, the Conservatives aim to reward hard working individuals and build a dynamic economy, all while halving inflation, growing the economy and reducing debt.
In this article we will cover all things Autumn Budget, landlords, tenants, property investors and business.
In the Autumn Budget Statement 2023, the Chancellor, Jeremy Hunt announced 110 measures that were to help boost the UK economy by hitting five key areas; reducing debt, backing British business, cutting taxes, building sustainable energy infrastructure and delivering world-class education.
The Government also announced that so far CPI Inflation has more than halved from 11% to 4.6%, which suggests that the economy has recovered fast from the pandemic and is expected to grow more in the future.
The main points in terms of business and investment within the Autumn Budget are:
- Investment Zone Funding: There will be financial incentives for businesses in Investment Zones and tax reliefs for Freeports will be extended for another 5 years.
- AI Investment: There will be a £500 million investment into Artificial Intelligence, strengthening the UK’s position as an AI powerhouse.
- Business Tax Breaks: The full expense for businesses will become permanent – allowing businesses to claim 25p in corporation tax for every £1 they invest in IT, equipment and machinery.
There was a lot to uncover within the Autumn Budget, so if you would like to read it for yourself, the online Autumn Budget can be found here.
What does the OBR forecast mean for the housing market?
The Office for Budget Responsibility (OBR) predicted that there will be a slight decline in house prices by the end of 2024, with a plunge of 4.7%. This may mean that the average UK house price could reach £266,000 by the end of 2024.
The OBR does however, predict a recovery in house prices but we will not see house prices like the peak of 2022 until 2027.
The OBR also predicts that there will be an increase in business spending by £14 billion and an increase of 78,000 more jobs by the end of 2025.
In the Autumn Budget, there was no mention of the anticipated changes to Stamp Duty, but there was the announcement of increased investment into housing supply, affordable homes, support for home movers and an extension on the Mortgage Guarantee Scheme Extension.
The increased investment into housing supply comes as the government reinforces the importance of building new build homes in strategic locations in order to nurture economic growth.
They will pump an additional £32 million into housing and planning in order to ‘unlock’ thousands of new build homes, which will be done by introducing measures to tackle:
- Planning backlogs.
- New Permitted Development Rights.
- Housing supply for Cambridge, Leeds and Lincoln.
- A new West Yorkshire transit system and rapid transit bus network in Thamesmead.
One of more vague measures, was the Government’s ‘support for home movers’ which looks to support home moves by improving the buying and selling process all while including pilot initiatives for property tech products and digitising local council property data.
This could come as part of the Government’s Make Tax Digital initiative, and could well be beneficial for landlords buying and selling property.
The UK Government also committed £3 billion to extending the Affordable Homes Guarantee Scheme by building more affordable housing. All while extending the Public Works Loan Board policy margin in order to support local authority social housing investments.
And finally, one of the most spoken about aspects of the Autumn Budget housing market measures; the Mortgage Guarantee Scheme Extension. This measure will extend the Guarantee Scheme for a further additional 18 months.
Does the Autumn Budget affect the housing market negatively?
While the Autumn Budget does not directly impact the housing market negatively, the initiatives introduced to support the housing market could actually backfire.
An increase in new build home supply could increase competition in the housing market, especially if the new housing stock is being built in areas of high demand. Luckily however, Leeds, Cambridge and Lincoln all have an imbalance between the number of properties available and demand.
The Mortgage Guarantee Scheme will ensure that potential buyers with smaller deposits will be able to climb on to the property ladder easier, however, this extension may produce an upward pressure on property prices in areas with lower housing supply.
Within the 120 measures released by the Autumn Budget Statement, there were three motions which were announced that would directly affect Property Investors; house conversions to flats, one pension pot for life and planning system performance reforms.
One house, two flats
One of the most talked about aspects of the Autumn Budget for Property investors was the opportunity to convert any house into two flats under the new Permitted Development Rights. This was as long as the exterior of the property remained unaffected.
This rule change could provide property investors with a greater control over the amount of rent they can produce from a single property. Furthermore, any house which has been converted into two flats will probably sell for more on the open market.
One pension pot for life
Having one state pension pot for life will allow savers to have one single pension pot and allow greater control. Traditionally when people move jobs, they would be automatically signed up to the new organisation’s pension scheme, and unless tracked, many previous pension pots become lost.
This simplification of pension saving will allow many potential property investors in the future to have access to a singular pension pot.
Planning system performance reforms
The Government also announced that there will be a planning service launched across England. This planning system performance reform will guarantee accelerated decision dates for key applications and fee refunds when these are not met.
The Planning system performance reforms also means that there will be initiatives to increase transparency and reporting of planning authorities records when delivering time sensitive decisions.
This effectively means that there will be faster planning applications for potential property developers and investors.
The Autumn Budget Statement 2023 has several measures that have negative and positive implications for businesses in the UK. These include several business growth measures, tax measures, national living wage, business rates and additional measures.
5 Autumn Budget measures for businesses
The government announced significant investment in the manufacturing industry, with a total commitment of £4.5 billion up to 2030, including allocations for aerospace and green industry firms.
There was a particular emphasis on the technology sector, with a commitment to spending an additional £500 million on Artificial Intelligence (AI) over the next two years, aiming to make the UK an ‘AI powerhouse.’
The business tax break known as ‘full capital expensing’ has been made permanent, allowing businesses to deduct the costs of IT, machinery and equipment investments from their profits, reducing their corporation tax liabilities.
While there were expectations of tax cuts, small business rates relief was frozen. However, the 75% business rates discount in the retail, hospitality and leisure industries were extended.
A focus on capital expenditure, with the permanent continuation of full capital spending described as the largest British tax cut in modern history.
The National Living Wage is set to increase to £11.44 per hour for workers over 23 and it will be extended to include 21 and 22-year-olds for the first time.
This in tandem with a 2% cut in employee National Insurance contributions for those earning between £12,570 to £50,270, results in an average saving of £415 per annum for those on a £35,000 salary.
There will also be reforms to late payment practices, aiming to crack down on companies paying SME invoices late.
While business rates are set to rise with inflation, the small business multiplier has been frozen for an additional year.
The 75% business rates relief for eligible retail, hospitality, and leisure businesses (up to £110,000 per business) was extended for the financial year 2024-25.
The government also announced an extension of the freeze on alcohol duty until 1st August 2024.
There will also be a simplification of Research and Development (R&D) relief, merging the current R&D Expenditure Credit and SME schemes from April 2024.
And finally, there was mention of an update to Making Tax Digital, with the maintenance of the £30,000 entry threshold for small businesses and a continued roll-out from April 2026 for those with an income of more than £50,000 a year.
The Autumn Budget 2023 hits many general measures that will affect residential and commercial landlords, but there are three in particular that will benefit them the most; Self-employee tax cuts, the Business rate relief and electricity bill reduction.
Self-employee tax cuts
Under the Autumn Budget, self-employed letting agents and landlords will receive tax cuts that will affect nearly 39% of landlords with five or more properties in the UK.
The National Insurance tax cuts, include the abolishment of the Class 2 band, people in Class 4 will now pay 8% and people in the Class 1 National Insurance rate will be cut by 2%.
The abolishment of the Class 2 NI rate will mean that self-employed people will no longer need to pay the compulsory charge of £3.45 per week which will save you around £192 per year.
Business rate relief
Smaller agencies, with rateable values under £15,000, will also benefit under the Autumn Budget, as the small business multiplier has been frozen for another year.
So far, the Government has already guided a third of properties through small business rate relief. This business rate relief is set to save the average independent business more than £20,000 over the next annum.
Electricity Bill reduction
The electricity bill reduction will reduce delays in clean energy businesses accessing the electricity grid, and offer them up to £10,000 off electricity bills for those near new transmission infrastructure.
Does the Autumn Budget Statement affect tenants?
On a whole, the Autumn Budget Statement brings in plenty of measures that will help tackle imbalance within the UK economy. Apart from increasing top class education services via apprenticeship funding, tenants will also benefit from a National Living Wage and Local Housing Allowance increase.
Local Housing Allowance increase
The Local Housing Allowance (LHA) is being increased in order to support lower income tenants, with the Local Housing Allowance covering at least 30% of local market rents. The LHA calculated the maximum amount that private renters can claim Housing benefits or Universal Credit. This initiative will provide 1.6 million households with an average of £800 in support.
Higher living wage for lower earning tenants
Within the Autumn Budget Statement, the Chancellor announced there would be an increase to the National Living Wage, raising it from £10.42 to £11.44 per hour. This could mean that someone on a 39 hour week, and a salary of £21,000 will see an increase of £2200 annually.
The rise in National Living Wage will affect more than 2.7 million people in the UK, and will help allow more people to afford to rent.
Start your property portfolio today!
The Autumn Budget Statement was announced on the 22nd November 2023 and acts as the mini budget after the Spring budget which took place earlier this year. They announced many different measures which aimed to lean the UK away from a recession.
Under the Autumn Budget, the Conservatives aim to reward hard working individuals and build a dynamic economy, all while halving inflation, growing the economy and reducing debt.
In this article we will cover all things Autumn Budget, landlords, tenants, property investors and business.
In the Autumn Budget Statement 2023, the Chancellor, Jeremy Hunt announced 110 measures that were to help boost the UK economy by hitting five key areas; reducing debt, backing British business, cutting taxes, building sustainable energy infrastructure and delivering world-class education.
The Government also announced that so far CPI Inflation has more than halved from 11% to 4.6%, which suggests that the economy has recovered fast from the pandemic and is expected to grow more in the future.
The main points in terms of business and investment within the Autumn Budget are:
- Investment Zone Funding: There will be financial incentives for businesses in Investment Zones and tax reliefs for Freeports will be extended for another 5 years.
- AI Investment: There will be a £500 million investment into Artificial Intelligence, strengthening the UK’s position as an AI powerhouse.
- Business Tax Breaks: The full expense for businesses will become permanent – allowing businesses to claim 25p in corporation tax for every £1 they invest in IT, equipment and machinery.
There was a lot to uncover within the Autumn Budget, so if you would like to read it for yourself, the online Autumn Budget can be found here.
What does the OBR forecast mean for the housing market?
The Office for Budget Responsibility (OBR) predicted that there will be a slight decline in house prices by the end of 2024, with a plunge of 4.7%. This may mean that the average UK house price could reach £266,000 by the end of 2024.
The OBR does however, predict a recovery in house prices but we will not see house prices like the peak of 2022 until 2027.
The OBR also predicts that there will be an increase in business spending by £14 billion and an increase of 78,000 more jobs by the end of 2025.
In the Autumn Budget, there was no mention of the anticipated changes to Stamp Duty, but there was the announcement of increased investment into housing supply, affordable homes, support for home movers and an extension on the Mortgage Guarantee Scheme Extension.
The increased investment into housing supply comes as the government reinforces the importance of building new build homes in strategic locations in order to nurture economic growth.
They will pump an additional £32 million into housing and planning in order to ‘unlock’ thousands of new build homes, which will be done by introducing measures to tackle:
- Planning backlogs.
- New Permitted Development Rights.
- Housing supply for Cambridge, Leeds and Lincoln.
- A new West Yorkshire transit system and rapid transit bus network in Thamesmead.
One of more vague measures, was the Government’s ‘support for home movers’ which looks to support home moves by improving the buying and selling process all while including pilot initiatives for property tech products and digitising local council property data.
This could come as part of the Government’s Make Tax Digital initiative, and could well be beneficial for landlords buying and selling property.
The UK Government also committed £3 billion to extending the Affordable Homes Guarantee Scheme by building more affordable housing. All while extending the Public Works Loan Board policy margin in order to support local authority social housing investments.
And finally, one of the most spoken about aspects of the Autumn Budget housing market measures; the Mortgage Guarantee Scheme Extension. This measure will extend the Guarantee Scheme for a further additional 18 months.
Does the Autumn Budget affect the housing market negatively?
While the Autumn Budget does not directly impact the housing market negatively, the initiatives introduced to support the housing market could actually backfire.
An increase in new build home supply could increase competition in the housing market, especially if the new housing stock is being built in areas of high demand. Luckily however, Leeds, Cambridge and Lincoln all have an imbalance between the number of properties available and demand.
The Mortgage Guarantee Scheme will ensure that potential buyers with smaller deposits will be able to climb on to the property ladder easier, however, this extension may produce an upward pressure on property prices in areas with lower housing supply.
Within the 120 measures released by the Autumn Budget Statement, there were three motions which were announced that would directly affect Property Investors; house conversions to flats, one pension pot for life and planning system performance reforms.
One house, two flats
One of the most talked about aspects of the Autumn Budget for Property investors was the opportunity to convert any house into two flats under the new Permitted Development Rights. This was as long as the exterior of the property remained unaffected.
This rule change could provide property investors with a greater control over the amount of rent they can produce from a single property. Furthermore, any house which has been converted into two flats will probably sell for more on the open market.
One pension pot for life
Having one state pension pot for life will allow savers to have one single pension pot and allow greater control. Traditionally when people move jobs, they would be automatically signed up to the new organisation’s pension scheme, and unless tracked, many previous pension pots become lost.
This simplification of pension saving will allow many potential property investors in the future to have access to a singular pension pot.
Planning system performance reforms
The Government also announced that there will be a planning service launched across England. This planning system performance reform will guarantee accelerated decision dates for key applications and fee refunds when these are not met.
The Planning system performance reforms also means that there will be initiatives to increase transparency and reporting of planning authorities records when delivering time sensitive decisions.
This effectively means that there will be faster planning applications for potential property developers and investors.
The Autumn Budget Statement 2023 has several measures that have negative and positive implications for businesses in the UK. These include several business growth measures, tax measures, national living wage, business rates and additional measures.
5 Autumn Budget measures for businesses
The government announced significant investment in the manufacturing industry, with a total commitment of £4.5 billion up to 2030, including allocations for aerospace and green industry firms.
There was a particular emphasis on the technology sector, with a commitment to spending an additional £500 million on Artificial Intelligence (AI) over the next two years, aiming to make the UK an ‘AI powerhouse.’
The business tax break known as ‘full capital expensing’ has been made permanent, allowing businesses to deduct the costs of IT, machinery and equipment investments from their profits, reducing their corporation tax liabilities.
While there were expectations of tax cuts, small business rates relief was frozen. However, the 75% business rates discount in the retail, hospitality and leisure industries were extended.
A focus on capital expenditure, with the permanent continuation of full capital spending described as the largest British tax cut in modern history.
The National Living Wage is set to increase to £11.44 per hour for workers over 23 and it will be extended to include 21 and 22-year-olds for the first time.
This in tandem with a 2% cut in employee National Insurance contributions for those earning between £12,570 to £50,270, results in an average saving of £415 per annum for those on a £35,000 salary.
There will also be reforms to late payment practices, aiming to crack down on companies paying SME invoices late.
While business rates are set to rise with inflation, the small business multiplier has been frozen for an additional year.
The 75% business rates relief for eligible retail, hospitality, and leisure businesses (up to £110,000 per business) was extended for the financial year 2024-25.
The government also announced an extension of the freeze on alcohol duty until 1st August 2024.
There will also be a simplification of Research and Development (R&D) relief, merging the current R&D Expenditure Credit and SME schemes from April 2024.
And finally, there was mention of an update to Making Tax Digital, with the maintenance of the £30,000 entry threshold for small businesses and a continued roll-out from April 2026 for those with an income of more than £50,000 a year.
The Autumn Budget 2023 hits many general measures that will affect residential and commercial landlords, but there are three in particular that will benefit them the most; Self-employee tax cuts, the Business rate relief and electricity bill reduction.
Self-employee tax cuts
Under the Autumn Budget, self-employed letting agents and landlords will receive tax cuts that will affect nearly 39% of landlords with five or more properties in the UK.
The National Insurance tax cuts, include the abolishment of the Class 2 band, people in Class 4 will now pay 8% and people in the Class 1 National Insurance rate will be cut by 2%.
The abolishment of the Class 2 NI rate will mean that self-employed people will no longer need to pay the compulsory charge of £3.45 per week which will save you around £192 per year.
Business rate relief
Smaller agencies, with rateable values under £15,000, will also benefit under the Autumn Budget, as the small business multiplier has been frozen for another year.
So far, the Government has already guided a third of properties through small business rate relief. This business rate relief is set to save the average independent business more than £20,000 over the next annum.
Electricity Bill reduction
The electricity bill reduction will reduce delays in clean energy businesses accessing the electricity grid, and offer them up to £10,000 off electricity bills for those near new transmission infrastructure.
Does the Autumn Budget Statement affect tenants?
On a whole, the Autumn Budget Statement brings in plenty of measures that will help tackle imbalance within the UK economy. Apart from increasing top class education services via apprenticeship funding, tenants will also benefit from a National Living Wage and Local Housing Allowance increase.
Local Housing Allowance increase
The Local Housing Allowance (LHA) is being increased in order to support lower income tenants, with the Local Housing Allowance covering at least 30% of local market rents. The LHA calculated the maximum amount that private renters can claim Housing benefits or Universal Credit. This initiative will provide 1.6 million households with an average of £800 in support.
Higher living wage for lower earning tenants
Within the Autumn Budget Statement, the Chancellor announced there would be an increase to the National Living Wage, raising it from £10.42 to £11.44 per hour. This could mean that someone on a 39 hour week, and a salary of £21,000 will see an increase of £2200 annually.
The rise in National Living Wage will affect more than 2.7 million people in the UK, and will help allow more people to afford to rent.
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