Neil Cobbold, managing director of PayProp UK, comments on Chancellor Jeremy Hunt’s Autumn Statement announced on 22 November 2023.
Tenants will benefit from tax cuts and minimum wage rises
“It is encouraging to see the Chancellor has considered the industry’s input and raised the local housing allowance to the 30th percentile of local market rents. However, it is important that these figures are based on real rental price data that truly reflect the local cost of renting – which PayProp is uniquely able to provide.
“General tax and spending concessions announced today may aid tenants, but more targeted support is needed for the most vulnerable private rented sector (PRS) tenants. A 2% cut to the national insurance rate will reduce tax for tenants earning over £12,570 a year, while the minimum wage increase to £11.44 per hour from April will help others. However, fiscal drag due to income tax bands not rising with inflation may well wipe out some of these savings.
Business tax changes a mixed bag for the sector
“It is good to see some support for business in the form of permanently extending ‘full expensing’, which allows companies to deduct spending on investment from profits. However, there is a question as to how many estate and letting agencies this will help. Listed agencies and large chains may be able to write off some investment expenses, but smaller agencies and sole traders are unlikely to reap big benefits of this tax change. There is also the additional cost of the rise in the minimum wage to consider. While beneficial to employees and tenants, it may impact agency profits.
“On the other hand, the continuing freeze on business rates for smaller properties will help some high street agencies, while the abolition of Class 2 National Insurance compulsory contributions will help self employed agents, as will a reduction in Class 4 National Insurance.
No support for unincorporated landlords, but support for house building
“At a time when parliament is busy debating tougher regulations for the private rented sector, it is disappointing that the Chancellor has not used this opportunity to either allow landlords to deduct costs, including mortgages, from rental income, or to provide other financial support to encourage them to keep their properties in the PRS. While the reduction in inflation will eventually reduce mortgage costs, it may be too late for landlords who are already defaulting on their buy-to-let mortgages. The latest stats from the government show an 11% increase in repossessions.
“Other announcements may have an impact on the PRS, but not immediately, including a new permitted development right allowing property owners to convert a house into two flats, and an allocation of funds to planning reform, designed to speed up the delivery of new housing.”
