What the 2023 Spring Budget Means for Landlords
Published on March 31, 2023 by Sarah Mac
The Spring Budget 2023 included various measures that will affect both landlords and tenants. Join us as we pick out the news that’s relevant to the private rental and property investment sector.
Most industry commentators agree that the Spring Budget 2023 failed to address the current issues within the private rented sector, with many considering it a missed opportunity to tackle the housing problem and try to keep downhearted landlords within the sector.
The Economy
Whilst there were no tax changes designed to help landlords, there was good news in terms of the economy, with the Government reporting that the UK will avoid a technical recession, which may prove reassuring for landlords who were concerned about affordability for tenants and also for buyers and sellers who are struggling with high interest rates.
With inflation falling at quite a rapid rate and predicted to drop to 2.9% by the end of 2023, the Bank of England’s Monetary Policy Committee will face less pressure to keep increasing rates, which may bring some relief for those with a mortgage.
The Property Market
The housing market seems to be in a better position than expected, with buyers slowly returning and purchases up by 11% compared to the same period in 2019.
There was a small rise in the average property price from January to February, which could indicate slower market conditions and sellers pricing their properties closer to a realistic asking price as they come on the market.
Corporation Tax
Corporation Tax will rise to 25% for companies with profits above £250,000 from 1 April 2023. Landlords may still wish to consider operating as a limited company however, as the level of Corporation Tax payable may still be less than Income Tax. A Small Profits Rate of 19% will apply for companies with profits of £50,000 less, and there will be an upwards sliding scale between profits of £50,000 and £250,000.
Capital Gains Tax
From 6 April 2023, the allowance on Capital Gains Tax will drop from £12,300 to £6,000, and will drop even further in April 2024 to £3,000. This means there will be more to pay on the sale of any investment property that has increased in value.
Capital Allowances
From 1 April 2023, businesses will be able to claim a 100% capital allowance for three years which will reduce the overall tax bill.
Any investments made in qualifying plant and machinery will qualify for a first year 100% allowance for main rate assets. Companies investing in special rate and long life assets will also benefit from a 50% first year allowance.
Whilst property investors cannot claim capital allowances for residential property, they can on furnished holiday lets, and IT equipment, such as a new PC, providing it is used to run their business.
Pension Lifetime Allowance
The Pension Lifetime Allowance will increase from £40,000 to £60,000 from 6 April 2023, and will be completely removed from April 2024. These reforms aim to keep skilled individuals in the workplace without fear of being penalised for saving too much in their pension funds.
However, as many people who were previously subject to the limit invested their capital in the rental sector to top up their income, it could mean the buy-to-let market will be negatively impacted.
Energy Price Guarantee
The Energy Price Guarantee will be kept at £2,500 for a further three months, and will rise to £3,000 from 1 July rather than 1 April as originally planned.
There is also a plan to bring energy pre-payment meters in line with Direct Debits from July 2023, which is good news for all, and will help to reduce tenants’ energy bills on pre-payment meters.
Other Measures
Childcare reforms, including free childcare, and the freeze on fuel duty, may not directly benefit landlords, but will certainly be welcome news for tenants.