Key Takeaways For Landlords From The Autumn Budget 2022

From an extension of the energy price guarantee to a halved capital gains tax threshold, here's what landlords  need to know about the Autumn Budget 2022.

Capital gains tax relief allowance halved

From 2023, the Annual Exempt Amount for capital gains tax will be cut from £12,300 to £6,000, and then cut again to £3,000 from April 2024.

“This will be unwelcome news for landlords, second homeowners, and those looking to sell their property as capital gains tax is applied at a much higher rate for residential property sales," says Jamie Morrison, Head of Tax at HW Fisher.

Stamp duty cut to remain - but only until 2025

The Chancellor shared that “the OBR expects housing activity to slow over the next two years, so the stamp duty cuts announced in the mini-budget will remain in place but only until March 31 2025.” This means that the threshold of the price of a property before stamp duty is paid will stay at £250,000, up from the previous threshold of £125,000 - but now for a time limited period.

Social housing sector rent cap to be introduced

The social rented sector is currently expecting rent hikes of up to 11% next year, which is why the government has announced a 7% cap on rent increases for social rents in 2023-24. This will help tenants save around £200 next year.

Matt Cowen, Senior Associate at Winckworth Sherwood, says: “No doubt there remain tough times ahead for many social housing tenants squeezed by the cost-of-living crisis, but the introduction of this rent cap will partly mitigate the 11.1% rent increases that would have otherwise taken effect from next April, being September’s CPI rate of 10.1% plus 1%. “It should also be remembered that the rent cap announced today does not apply to shared ownership rents or private sector rents.”

Dividend allowance will be cut from 2023

The dividend allowance will be cut from £2,000 to £1,000 in 2023, and then drop further to £500 in April 2024. This will affect any landlords using limited company structures - a growing band of landlords - as they pay themselves and other shareholders dividends from their rental profits.

Threshold for top rate of income tax cut

More high-earning landlords will start paying the 45% top rate of income tax, as the threshold will be brought down from £150,000 to £125,140. This means that "those earning £150,000 or more will pay just over £1,200 more a year," says Hunt.

Income, national insurance, and inheritance tax allowance thresholds frozen until 2028

Although the tax bands stay the same, freezing the current allowance threshold for income tax and national insurance tax means that more people will move into higher tax brackets as their wages increase in line with inflation. Inheritance tax will also be frozen at the current rate of £325,000. "The extension means it is likely that more estates will become liable to inheritance tax, thanks to rising house prices and soaring inflation," says the IFA Continuum.

The National Living Wage will increase

The National Living Wage in the UK is currently £9.50 an hour for those over-23s. This will rise by 9.7% to £10.42 - an annual pay rise worth £1,600 to the average worker and the largest increase in the UK's national living wage ever. Although this will of course increase costs for businesses currently paying the living wage to staff members, it will also offer some extra financial security to any tenants currently receiving minimum wage.

Energy price guarantee extended for a further 12 months

The energy price guarantee will remain in place for a further 12 months from April 2023, but the price will increase to £3,000 per year for the average household, meaning an average of £500 support for every household in the country.

The chancellor will also introduce an additional cost of living payment next year:

£900 to households on means-tested benefits
£300 for pensioner households
£150 for those on disability benefits
£1 billion of funding for the household support fund, extending the support for a further 12 months
It will also release details of the new targeted approach for businesses from next April by the end of the year.

Source: Goodlord