The autumn statement laid out for 2023 has basically been used to try and stabilise the economy by the Government. They had a 55 billion pound hole that needed to be filled and have been trying to bring inflation down.
The budget was not kind to landlords.
The treasury has announced the following;
Cuts to capital gains tax threshold.
The treasury has announced big changes to the tax free allowance for capitals gains tax, the tax paid when you sell a property.
The tax allowance will drop from more than half in April 2023 from £12,300 to £6,000.
It will then be halved again to £3,000 in April 2024.
This means that landlords will have to pay more tax on the profit they make when selling a buy to let property. Capital gains tax is already geared against residential property with a rate of 28%, compared to 20% on other assets.
Changes to the capital gains tax allowance could mean that more landlords will hold onto properties but this may also not be the case.
Stamp duty cut will end in 2025.
The indefinite stamp duty cut announced in September will end on the 31st March 2025. This will mean that any first time buyers will continue to benefit from the stamp duty exemption up to the first £250,000 for a property purchase over the next 2 years. However, after that period the stamp duty threshold will then return to £125,000. Is there going to be a late rush once this comes around again and the answer is probably yes.
If you are a buy to let landlord looking to expand your portfolio you still have to pay the 3% stamp duty search isle.
Will this make it more appealing to tenants to potentially look to go into the mortgage market? This all depends on the interest rates and whether they actually start to come back down again after the treasuries announcement.
What other measures were used as stealth taxes that would affect landlords?
There weren’t really any other taxes as such. However, they have frozen everybody tax threshold for a further two years until April 2028. This means the tax threshold of £12,570 will not be increased so in real terms you could be paying more money. National insurance and inheritance tax threshold have also been frozen to 2028. Inheritance tax threshold will remain at £325,000 with a rate of 14%.
Freezing these thresholds is often known as a stealth tax. Due to the rate of which people pay tax stays the same but as property prices increase and wages, people pay more tax.
Additional income tax also lowered to £125,000.
The highest earners in the country will now pay income tax of 45% over earnings of £125,140. This is down from £150,000.
What do landlords need to look out for in 2023?
We doubt very much there will be much more physical events that will affect the landlords in 2023. However, there are some massive changes coming down the track for landlords.
These are as follows;
- The details of the Governments rentals reforms including the scraping of section 21 will be published.
- Corporation tax rate will rise to 25% in April that could therefore limit some landlords profits where you have incorporated.
- Interest rates and inflation is more than likely either going to rise or start to stabilise. This could effect buy to lets costs and tenants ability to pay rent.
- There is still more details to come from the Government plans on increasing the minimum energy performance certificate rating for rental properties.
It all leads to an unfortunate situation where the recession is going to affect everyone including landlords.
Damp or mould?
Michael Gove made a statement in the commons regarding the awful case of a young child in Rochdale that unfortunately died due to the damp and mould at the property. It was an awful case of which there is no excuse that it shouldn’t have been dealt with. However, the case is more complicated than it first seems.
Unfortunately, it means the Government is going to bring in substantially more regulations against private landlords rather than the social landlords that it related to.
A new housing ombudsman is being created. They will have the ability to proactively inspect landlords properties and issue unlimited fines.
Landlords will also be judged and allowing tenants to complain quicker and easier where they have damp and mould. There is already provisions within the Unfit for human habitation bill for this to be dealt with but the Government want to go further. Unfortunately, it is a fine line we believe between condensation and damp. Condensation is normally a tenant based problem where the property is not heated and ventilated properly. In these times of hostility we have seen an increase in condensation issues due to where tenants have decided not to turn their heating on. This is understandable with most tenants as the cost of it is huge but not every condensation problem is the landlords.
The Government will now use their levelling up and private rented sector white papers to set out and introduce stronger and legally binding decent home standards in the private landlords sector. This is one of the Governments main mission to ensure a number of non-decent homes across all tenures in reduced. The biggest improvements to come by 2030 occurring in the lowest performing areas. Unfortunately, these have not yet been outlined in full. We suspect it will be landlords responsibility in future to deal with all issues. Rather than the tenants trying to maintain the property correctly. We will keep you advise of what happens with the legalisation in 2023.