With all eyes on Rishi Sunak for his latest Budget, what property-related measures can letting agents expect to see announced by the Chancellor?
On Wednesday, March 3, Chancellor Rishi Sunak will deliver his Budget statement, setting out the financial and spending policies for the year ahead.
The ongoing response to the Covid-19 pandemic is expected to dominate proceedings, but there is mounting speculation that a number of property-related measures could be announced.
The Treasury will be keen to show how it is going to continue supporting businesses and individuals while at the same time demonstrating how it intends to make up the deficit caused by the pandemic response.
It’s always wise to expect the unexpected when it comes to the Budget. However, below we take a closer look at three measures that could well make it into Sunak’s address and what they could mean for letting agents.
Three-month stamp duty holiday extension
After months of speculation and campaigning by various stakeholders, it appears the stamp duty holiday will be extended by three months.
A recent report in The Times suggests a new cliff-edge end to the stamp duty holiday will be introduced as part of the Budget statement on March 3.
One of the most successful aspects of the campaign for a stamp duty holiday extension has been the petition which has now accumulated over 150,000 signatures.
The petition showed the level of support for an extension, leading to a Parliamentary debate and making it a challenging issue for the Chancellor to ignore.
The rumoured extension will help thousands of property purchasers, including many landlords and investors, to get their transactions over the line and benefit from significant tax savings.
However, there is concern that setting a new deadline date, rather than tapering off the holiday and catering an extension to transactions already in play, will only ‘kick the can down the road’ and create a new cliff-edge which will still result in thousands missing out on the holiday.
Market commentators also suggest that a cliff-edge end could impact the demand and supply of homes for both sales and lettings, affecting transaction levels and activity for the remainder of the year.
The ongoing rollout of the Covid-19 vaccine and cautious roadmap out of lockdown should provide the market with a boost throughout the spring and summer which could counteract the negativity associated with the end of the stamp duty holiday.
Potential changes to Capital Gains Tax
Last year, the Office for Tax Simplification produced a report commissioned by the Government, which recommended increasing Capital Gains Tax (CGT) rates and reducing exemptions.
Due to the Government’s need to claw back revenue to reduce the pandemic deficit and the report’s timing, CGT changes have been high on the list of Budget rumours for many weeks now.
The report estimated that doubling CGT rates could net the Treasury an additional £14 billion in annual income, a not-insignificant sum.
While CGT is not a tax paid regularly by most people, it does significantly impact the lettings sector as landlords are required to pay it when selling a rental property.
If a rise in CGT rates is introduced in the Budget, there is concern that it could lead to a buy-to-let property sell-off, which would seriously impact the rental housing supply.
What’s more, higher CGT rates could discourage existing landlords or those looking to invest in the rental sector for the first time from purchasing new properties, something which could also impact housing supply and push up rents paid by tenants.
As a letting agent, it’s an excellent opportunity to communicate any CGT changes to landlords as quickly as possible, explaining what it could mean for them.
Although rising CGT rates will be viewed as another attack on buy-to-let investors, property still represents an attractive long-term investment, especially for landlords with good letting agents and access to products that protect their rental income.
Will we see rent grants for tenants?
Another policy that the Chancellor is rumoured to be considering is launching a package of financial support such as rent grants for tenants in England.
Similar measures are already in place in Scotland and Wales, while high-profile organisations such as the National Residential Landlords Association, Shelter and Citizens Advice have come together to campaign for rent grants.
A joint report estimates that at least half a million renters are in arrears due to the pandemic. In response, the organisations have called for “a targeted financial package to help renters pay off arrears built since lockdown measures started in March last year”. They say this will help to sustain existing tenancies.
There is also considerable speculation that the furlough scheme will be extended until the summer, when most restrictions are expected to be lifted as part of the Government’s roadmap out of lockdown.
Any measures such as those outlined above that are announced as part of the Budget would be welcomed by the nation’s landlords and letting agents.
If landlords can reduce rent arrears, their cash flow is improved while letting agents’ management fees are more secure, and the chances of evictions needed in the future are reduced.
Alongside any Government measures to help tenants in arrears, letting agents can work with landlords and tenants to agree on affordable repayment plans. It’s also crucial for agents to communicate regularly with all parties and keep records of all conversations and payments. Having the right insurance and rent guarantee in place is also an essential consideration for agents and landlords to safeguard their income.