Spring Statement 2022: What does it mean for landlords? 29 Mar 2022
Rishi Sunak, the Chancellor of the Exchequer gave his Spring Statement this month.
The headline measures of the Chancellor’s Spring Statement include:
- A cut to Basic Rate Income Tax. From 2024, this will reduce from 20p to 19p. According to the Chancellor, this will mean a £5bn tax cut that benefits 30 million people.
- The National Insurance threshold will increase by £3000. That means people can earn £12,570 before being required to contribute. This new threshold will take effect in July 2022, and according to the Chancellor’s figures this will amount to a £6bn tax cut for 30 million people.
- Home energy efficiency measures will have VAT slashed. Insulation, solar panels, and heat pumps have all had VAT cut from five per cent to nothing. This will remain in place for five years, and could save a typical UK household £1000 on the installation of solar panels.
- In the midst of rapidly rising fuel costs, he has cut fuel duty by 5p per litre – this will remain in place for a year
- For businesses, the Chancellor announced that retail, hospitality, and leisure sectors will receive a 50% discount on their business rates up to the value of £110k.
What do measures announced in the Spring Statement mean for landlords?
This year’s Spring Statement aside, 2021 was a big year for the announcement of tax increases, particularly with Corporation Tax due to jump from 19% to 25% from April 2023, and Income Tax thresholds being frozen for 4 years.
Despite the increasing of the National Insurance threshold, the promised cut to Basic Rate Income Tax will not come into force until 2024. Many landlords could actually face rising taxes due to a 1.25 per cent increase in National Insurance from April 2022. Some landlords may also encounter “stealth-taxation” where thresholds and allowances not being increased automatically places them into a higher tax band.
It isn’t all doom and gloom…
VAT cut for home energy efficiency measures
This is a welcome offering for homeowners looking to increase the energy efficiency of their property, a welcome boost for landlords in the face of being required to improve the energy ratings of their portfolio.
The job market is buoyant
Tax measures aside, the rate of unemployment is currently less than 4%, identical to pre-pandemic figures. This can in part be credited to the Chancellor’s implementation of the furlough scheme, which saw many jobs protected throughout the pandemic that may not have been otherwise.
Job vacancies are at record levels, and the strength of the job market can give landlords confidence going forward in the availability of excellent tenants with the ability to pay rent. This is excellent news after the periods of uncertainty many faced during the lockdowns.
There is also an incredibly high demand for properties at the moment both for those looking to rent, and those looking to buy. The UK has an estimated £200 billion in involuntary savings – this means the money people have saved due to not being able to go out as much, or go on holiday during the pandemic. For lots of people, this is giving them the freedom to look at moving home, whether they’re renters or buyers and is considered part of the reason demand for property is currently so high.
Landlords, have your say on tax
There could be tax simplification on the horizon for property income. The Office for Tax Simplification (OTS) has launched an online survey in order to gather landlord views about the most complex parts of paying taxes on property income, how easy it is to report the correct amount of income and expenses and suggestions for improvement.
Landlords - have your say on tax
Although the OTS is an independent body, the government often uses its research to inform their decision making when it comes to tax, so this could indicate it's something they are considering. If you'd like to have your say on the matter, please take their online survey before 5th June 2022