Lacklustre Budget is mixed bag for Property Investors

The UK government Budget delivered a mixed bag for landlords, property investors and others wanting a sustained recovery in the British economy.

The good news for the property sector revolves around a cut in Capital Gains Tax on property from 28 per cent to 24 per cent – although ironically this will give most benefit to landlords selling their properties.

Also welcome is a substantial £242m of investment in Barking Riverside and Canary Wharf in London. Here, the Chancellor says, nearly 8,000 homes will be built “as well as transforming Canary Wharf into a new hub for life science companies”.

However, this is tempered by several less favourable announcements.

The government is scrapping so-called Non-Dom tax arrangements under which non-UK citizens had paid UK tax only on their UK earnings, not on those from elsewhere.

This is widely considered to be a measure which may deter wealth creators from living in the UK – and, therefore, contributing to the prime and super-prime residential sectors, especially in London.

Overall, these sectors’ economic contribution is significant, generating over £36 billion across some 16,000 transactions last year.

Also disappointing to the property industry is the confirmation that tax breaks for those letting out furnished property as holiday and short lets will be ended – this is described as a bid to urge investment property owners to shift their units to the long term rental market. However it may be seen as a disincentive to invest in the first place.

The Budget – as always, and especially now in a General Election year – contained plenty of feel-good announcements aimed at giving short term gains to voters and a confidence boost.

The Chancellor has reduced National Insurance contributions for most working adults and announced a number of high-profile investments in the NHS, schools and regional projects.

Whether this is enough to change the political weather remains to be seen: initial reactions has suggested the Budget has been lacklustre and uninspiring.

Investors, landlords and other members of the property sector have traditionally favoured the Conservatives: this Budget is one of the last opportunities for that party to win over support after multiple polls showing significant Labour leads.

Next stop – the UK General Election!

Click the player below if you would like to watch our ‘UK Budget impact on property’ with Richard Donnell from Zoopla, hosted by Marc von Grundherr. Filmed 07/03/24.

Here is a summary of other policy announcements in the Budget:

• Inflation to hit two per cent over summer;
• from April 1, increasing VAT registration threshold from £85,000 to £90,000;
• a series of levelling-up measures includes £100m for areas including High Peak, Dundee, Conwy, Erewash, Redditch and Coventry to support “cultural projects”;
• Scotland to get extra £300m, Wales £170m and Northern Ireland £100m under the Barnett devolved funding formula;
• £6bn more for the NHS, including £2.5bn this year;
• £105m over next four years to building 50 new special free schools;
• £75m for ‘hotspot policing’;
• a freeze on fuel duty for another 12 months;
• a six-month extension to the Household Support Fund;
• a freeze in alcohol duty;
• new tax on vapes and one-off rise in tobacco duty;
• energy profits levy to be extended until 2029;
• new British Savings Bond with a guaranteed rate, fixed for three years;
• a new British ISA, allowing additional £5,000 investments in UK equity to be made each year;
• extra £45m for medical charities, including £3m for Cancer Research UK;
• £1m for a memorial to honour Muslims who died in two world wars.