Here are the key points from Chancellor Jeremy Hunt's Autumn Budget 2022 that landlords and letting agents need to be aware of, including changes to taxes and extended support for energy bills.
The tax relief allowance for capital gains has been decreased by half.
The amount of money exempted from capital gains tax will be cut in half, first to £6,000 in 2023, and then again to £3,000 the following year.
“This will be unwelcome news for landlords, second home owners 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.
The government has announced that the cut to stamp duty will remain in place until 2025.
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.
A rent cap is set to be introduced for the social housing sector.
Expecting rent hikes of up to 11% next year, the social rented sector will be capped at 7% by the government in 2023-24. This change will help tenants save around £200 next year.
The Senior Associate at Winckworth Sherwood, Matt Cowen, stated that though the cost-of-living crisis is still hard for many social housing tenants, the rent cap will lower the 11.1% rent increase set to take place next April by being September's CPI rate of 10.1%, plus 1%. He then went on to say that this new rent cap does not apply to shared ownership rents or private sector rents.
The dividend allowance will be cut in 2023.
Dividend allowances will fall from £2,000 in 2023 to £1,000 and then drop again to just £500 by April 2024. This only affects landlords using limited company structures who pay themselves rental profits through dividends instead of salary.
At what point will I begin paying the higher rate of income tax?
More people who make a lot of money from being an agent or renting land will have to pay the 45% top rate of income tax. This is because the limit for how much money you can make before having to pay this tax is going 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.
The government has announced that income, national insurance, and inheritance tax thresholds will be frozen until 2028.
If the current allowance threshold for income tax and national insurance stays frozen, then as wages increase along with inflation, more people will get pushed into higher tax brackets. Inheritance Tax will also stay at its present rate of £325,000.
The National Living Wage will be increased
The National Living Wage in the UK is currently £9.50 an hour for over-23s, but it will go up 9.7% to £10.42 next year - amounting to a yearly pay raise of £1,600 on average for workers and being the largest increase ever seen in the national living wage. This rise in costs will likely affect businesses that were already paying their employees this minimum wage, like estate agencies and letting agents, but there may be some financial benefits for tenants who receive minimum wage if they are able to keep their current job or find new employment easily because of increased wages across many sectors."
The National Insurance threshold for employers will remain frozen until 2028, the government has announced.
The personal allowance thresholds will stay the same, but this threshold will increase as wages do. Consequently, employers will pay more taxes as their employees' salaries grow. The Employment Allowance is also staying at its current level of £5,000. Ultimately, these changes mean that around 40% of businesses won't have to pay National Insurance Contributions anymore.
The energy price guarantee has been extended for another 12 months.
The energy price guarantee will stay for one more year from April 2023. But the price will go up to £3,000 per year for the average family. That means an average of £500 help for every family in the country.
A rent cap is to be introduced for social housing sector tenants.
The social rented sector is expecting rent hikes of up to 11% next year, but the government has announced a 7% cap on rent increases for social rents in 2023-24, which will help tenants save around £200 next year.