With the biggest contraction in the economy for 300 years (-10%) the Office for Budget Responsibility (OBR) nevertheless predicts a swift recovery from November. The economy – as measured by GDP – is set to rise by 4% this year, up 7.3% in 2022 and increasing by c.1.6% in the following 3 years. The economy is expected to be back to pre-Covid levels by the middle of 2022.
This bounce back is encouraging news as it supports investor confidence and provides the bedrock for the property market.
Expat Property Investors – what things of note?
Stamp Duty Land Tax (SDLT)
We have all been holding our breath for this one. The SDLT holiday extension is happening as widely trailed, providing an additional 3 months with the nil rate band of SDLT on purchases up to £500,000 to the end of June and a further 3 months on purchases up to £250,000 from July to September 2021. The 3% investor additional SDLT continues as normal during this period.
The intention is to maintain confidence in the housing market following the coronavirus (Covid-19) pandemic.
From the 1st of October the ‘old’ stepped system kicks back in with SDLT charges starting at £125,000 threshold.
However the non-resident 2% SDLT surcharge – of which little is announced – is still due to go ahead. More here.
Capital Gains tax (CGT)
No increase was mentioned in this budget – although it was widely expected there would be – but the limits have been frozen along with personal tax allowances which will be increased to £12,570 in April 2021 but held at this level until 2026.
Corporation tax
Corporation Tax is being increased substantially from 19% to 25% from 2023. This is relevant for those of you holding properties in a Limited Company or thinking of doing so. Although smaller companies with profits of up to £50,000 will continue to pay the lower 19% rate, capturing an estimated 70% of companies.
Construction Industry boost?
A new term has been introduced, that of ‘Super Deduction’, whereby companies investing in new plant and machinery can reduce their tax bill by 130% of the cost of the qualifying investment value. This temporary first year deduction replaces previous reliefs and allowances. This will stimulate business investment and help the construction industry.
Mortgage Guarantee scheme for First timebuyers
The Government announced its First Time Buyer mortgage guarantee scheme which enables them to buy with a 5% deposit and 95% mortgage loan. The Government underwrites the risk of the higher loan-to-value. This has brought the big high street brands on board with this scheme.
The Help-to-Buy scheme is being phased out. This ‘Mortgage Guarantee’ is a better deal for First Time Buyers because they aren’t restricted to new builds (which Help-to-Buy did) it applies to resale properties too. Given there is usually a premium attached to new builds and more so with Help-to-Buy new builds, which have a captive market, they are likely to be buying at keener prices all round.
It may be that many First Time Buyers can afford the monthly mortgage payment but just haven’t been able to get the deposit together, particularly in the South East.
Although the incentive for developers to build new housing is diminished, given Help-to-Buy gave developers and builders confidence to build because they had a ready market of First Time Buyers, so may not increase housing supply, it keeps the property market liquid.
The Government’s Levelling up agenda
The government has announced 8 ‘Freeport’ sites across the country. This means there will be tax incentives for businesses to base themselves in these designated areas. For example purchasers of land and buildings situated inside Freeport tax sites located in England will be able to claim relief from Stamp Duty Land Tax, subject to a ‘control period’ of up to 3 years (until 30 September 2026) and the land being acquired and used in a ‘qualifying manner’.
The 8 designated Freeport locations are:
- East midlands airport
- Felixstowe & Harwich
- The Humber
- Liverpool City region
- Plymouth
- The Solent
- Thames
- Teesside
What’s more the government announced a new economic campus beyond Westminster, in Darlington for parts or the Treasury, MHCLG and Department for International Trade.
These present opportunities for investors if you include inward investment and infrastructure improvements as part of your investment criteria.
If you would like help finding the right property for you then please get in contact.
My business focuses on helping time-strapped expats and busy business people who don’t have the local presence, or capacity, to acquire the ‘right’ properties for them. Property Venture® is an award-winning, Boutique property consultancy that finds the right investment properties for clients.
Disclaimer: Property Venture® is not a tax adviser but has outlined information in layman’s terms to enable top line comparisons, nor is it offering advice.
With regard to in-country legislation, letting licences and taxation laws, then you must take appropriate legal or taxation advice during your purchase process, at which time your solicitor or advisor will discuss with you up-to-date legislation and costs
Tags: Budget, expat investors, Expats, overseas landlord, Property tax, tax
During a recent seminar I ran with other property and tax experts, it became apparent that not only will taxation be heavier for Private Rented Sector (PRS) landlords, but also cashflow can be affected too. This is not a straight forward tax calculation and it can have unintended consequences.