The impact of the UK Spring Budget on property investors

On 3rd March, UK Chancellor Rishi Sunak made the annual Spring Budget announcement. This sets the UK’s financial situation and plans. After an unprecedented year due to the COVID-19 pandemic, there were many measures introduced to support jobs and the economy.

There were also a handful of announcements made that will impact the UK property market and some that will likely boost the sector and even help property investors. One of the biggest announcements made was the extension to the stamp duty holiday.

What is stamp duty?

Stamp duty is a tax paid when buying land, a house, flat or other building in England and Northern Ireland. It is based on a property’s value and if you are a first-time buyer. Stamp duty that is due on a property transaction must be paid within 14 days of completing.

To stimulate the property market and the economy during the COVID-19 crisis, the stamp duty holiday was announced in July 2020. It temporarily increased the stamp duty threshold from £125,000 to £500,000. This means buyers haven’t had to pay any stamp duty on properties valued up to £500,000, providing as much as £15,000 worth of savings. 

The stamp duty holiday effectively boosted the property market and led to an unprecedented level of demand. The temporary tax holiday was set to end on the 31st March 2021. However, as there has been such strong demand for UK property, the buying process is taking much longer than normal, causing a backlog of transactions.

Extension to the stamp duty holiday

In the Spring Budget, Rishi Sunak announced an extension to the current stamp duty holiday until 30th June. There will then be a tapering period from then to the end of September where the stamp duty holiday threshold will be set for properties valued up to £250,000. This will allow more buyers and investors to be able to take advantage of stamp duty savings until the previous threshold of £125,000 comes back into effect on 1st October.

This extension and tapering will continue to boost the property market throughout the summer. It will also likely bolster confidence in the market and could further boost demand and house prices across the UK.

For investors, keep in mind that the higher rate of stamp duty for additional properties still needs to be paid during the stamp duty holiday. However, this tax holiday has still saved property investors thousands of pounds. And from 1st April 2021, an extra stamp duty surcharge of 2% will take effect for all non-UK resident investors.

Capital gains tax rates remain

Prior to the Spring Budget announcement, there were rumours circulating in the property industry that capital gains tax rates would be increased. Capital gains tax is paid on the profit when selling an asset that has increased in value. Property investments make up a significant proportion of revenue from capital gains tax, and it applies to overseas property investors as well.

For now, capital gains tax rates are staying as they are, and the annual capital gains tax exemption will remain at £12,300 until the 2025/2026 tax year. Some in the industry are speculating capital gains tax changes could come in the Autumn Budget later this year.

Should I get into the property market now?

The policies announced by Chancellor Rishi Sunak are largely expected, given the ongoing pandemic damages that has been dealt to the UK economy. The property industry has lobbied hard to extend the stamp duty holiday which had significantly lifted investors’ sentiment and the gradual easing of the holiday into September 2021 is a prudent measure. For homebuyers and investors, it is clear that the housing market remains buoyant and the current environment offers an excellent opportunity to get invested. As the industry adage goes, one should always buy real estate and wait, not wait to buy real estate.

Happy investing!

You can view the latest budget announcements on the UK government’s website.

Questions about UK property investing? Use the Live Chat to talk to an Agent now. You can find out more about our recommended partners, included Tax advisors and solicitors here.

Disclaimer: The information contained in this article is not intended as, and shall not be understood or construed as, tax advice. The information contained in this article is not a substitute for tax advice from a professional who is aware of the facts and circumstances of your individual situation. It is expressly recommended that you seek advice from a professional. I shall not be held liable or responsible for any errors or omissions on this article or for any damage you may suffer as a result of failing to seek competent tax advice from a professional who is familiar with your situation.

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