How the Mini Budget affects second homeowners

The new Chancellor of the Exchequer, Kwasi Kwarteng, outlined a series of economic policies in September’s ‘Mini-Budget’ in an attempt to tackle the current cost of living crisis. Included was a freeze on energy bills, a cut on income tax, and a reverse on the national insurance rise, as well as alterations to Stamp Duty, corporation tax and bankers’ bonuses, all of which will be paid for by increasing the UK’s national debt.

More specifically:

Income Tax

Income tax is to be reduced with the basic rate being cut by 1 pence, from 20p to 19p as of April 2023. The top rate of income tax for the highest earners, which was 45%, is to be scrapped from April 2023 too.

National Insurance

Former Chancellor, Rishi Sunak, increased National Insurance by 1.25% in April 2022, Mr. Kwarteng is to reverse this from November 6th 2022.

Stamp Duty

The no-duty threshold is to be lifted from £125,000 to £250,000. First-time buyers will see the no-duty threshold increase from £300,000 to £425,000. The break is, however, only coming into effect in England and Northern Ireland

Bankers’ Bonuses

The previous cap that limited bonus payouts to twice their basic salary has been scrapped now allowing bankers to earn unlimited bonuses.

Corporation Tax

Corporation tax is to remain at 19% and not increase to 25% as initially planned.

How Will This Impact Landlords and Investors?

The housing market is at the present time a precarious place, particularly for first-time buyers. The inflation in house prices in comparison to the increase in wages is beyond disproportionate. The average house price in the UK is now 65 times higher than it was in 1970, whereas the average wage is only 36 times higher and whilst a permanent increase in the stamp duty threshold may help some buyers land themselves their first foot on the property ladder, it seems to be a short-term blanket fix for what is really a long-term problem.

With regards to the rental market, inflation has also hit the cost of properties per calendar month as according to Property Expert, Graham Norwood, the mix-adjusted average rise across the UK is an eye-watering 18.8%. There has also been a 24% decline in available properties on the rental market compared to June 2021 and so, consequently, as demand outweighs supply prices will continue to climb. Realistically, any spike in transactions can lead to a market bubble and a backlog of completions, which in turn will leave more people in temporary rentals for longer periods of time. Not to mention hikes in inflation rates by the Bank of England could mean that those without a fixed-rate mortgage may begin to feel the pinch too.

Having said that, a freeze on energy bills, could mean there may be a chance for people needing not to tighten their belts quite as much as what was anticipated a few months back.

For the most part, the new mini-budget leaves landlords and investors on fairly neutral ground with potential positives lying in the stamp duty threshold increase and the removal of the extra 5% income tax for the highest earners, but for renters, investors and landlords alike, it all depends on the circumstances of the individual as to how much or if at all they will benefit.