Spring Budget 2023: 7 key takeaways for letting agents and landlords
The Chancellor has announced the UK will avoid a technical recession - and shared details of measures to give the economy a boost.
The Chancellor, Jeremy Hunt, has presented his Spring Budget 2023. The budget includes a number of measures that will affect tenant affordability, agent businesses, and landlord costs. The Chancellor shared that "inflation has peaked" and that "the UK will not now enter a technical recession this year." Here are seven of the top takeaways from his speech for the lettings industry.
1. Measures that may affect your agency's direct business costs
Corporation tax will rise in April as planned, from 19% to 25%. Businesses that make a profit of more than £250,000 will pay this increased rate, affecting only 10% of businesses.
The fuel duty freeze will remain in place, with the 5p cut to stay, benefiting individuals - and agents that regularly drive to viewings.
2. More savings to stay in the pocket of your pension-age renters
The government will increase the amount that workers can add to their yearly pension allowance before paying any extra tax will be increased, from £40,000 to £60,000.
It will also abolish the lifetime allowance. The lifetime allowance doesn't affect the state pension, but affects the amount that you can save in a workplace pension scheme before you pay extra tax on the excess.
With the demographic of renters getting older, this is an affordability consideration for the long-term.
3. Energy price guarantee extended for a further three months
The current energy price guarantee will continue for an extra three months, expected to end in June 2023. Ahead of an expected fall in prices from July, this means that households will continue to see an average annual bill of £2,500.
This means that a "typical family" is expected to save £1,500 in total from both the energy price guarantee and the additional financial support offered under the Energy Bills Support Scheme.
Those on pre-payment meters often cover the poorest households, according to the Chancellor. Therefore, those charges will be brought in line with comparable direct debit payments.
You can read more about the energy price guarantee and support in our blog.
4. New measures to boost parents' budgets
The government outlined three new measures for parents. For the 700,000 parents on universal credit, the government will cover childcare costs up to a max of £951 for one child and £1,630 for two - an increase of almost 50% - per month, for eligible families.
Parents with school-aged children face barriers to working due to a lack of wrap-around care, covering both ends of the school day. The government will fund schools and local authorities to increase supply of this care, so that all parents can drop children off between 8am-6pm, by September 2026.
Eligible households with adults working at least 16 hours a week will be able to access 30 hours of free childcare per week for every child over the age of 9 months, rather than just for three to four years olds as is currently the case. This will cover families from the moment maternity or paternity leave ends.
This will help boost the budget of your tenants with children, and offer more certainty around their ability to pay rents.
5. No direct tax relief support for landlords
Aside from the corporation tax relief change, affecting some landlords with large portfolios operating as a company, there was little mentioned that would help encourage landlords to remain in the sector.
Prior to the budget, reinstating the tax relief on mortgage interest payments and cutting stamp duty were two of the proposals to help support the sector. However, neither made the cut.
6. Devolution of power to local authorities may have a housing impact
Greater Manchester and West Midlands Combined Authorities will be given more powers to "set the strategic direction over the Affordable Housing Programme in their areas."
Labour has previously announced its plans to devolve power to local authorities - which commentators have noted could "herald the introduction of rent controls." However, this possibility was not explicitly mentioned in the Spring Budget 2023 policy paper.
7. The Chancellor predicts that the UK will avoid a "technical recession"
Recessions would generally be marked by a drop in house prices. This would mean less savings required on deposits and less borrowing too - helping give first time buyers a boost. No recession means that house prices are likely to remain at higher rates - although not all recessions follow the same pattern.
The current situation must also take into account mortgage interest rates. House prices rose in February, as mortgage interest rates dropped, injecting some confidence into the market. However, the Office for Budget Responsibility predicts a 10% drop in house prices, driven by high mortgage rates.
The property industry will still need to keep an eye on these trends to understand their impact on house prices, landlord costs, and tenant house-buying potential.