Budget 2014 – “For Makers Doers and Savers”

14:30 PM, 19th March 2014, About 11 years ago 16

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Budget 2014 – what are the main points for Property118 readers and the PRS.

The Office for Budget Responsibility (OBR) confirmed the GDP forecast to grow by 2.7% this year, 2.3% next year, 2.6% in 2016/17 and by 2.5% in 2018. GDP (economic output) will finally reach its pre-credit crises levels this year. This is a 3 fold rise in previous predictions last year.

The key hidden statistic given by the OBR in this budget was that they predict CPI inflation to remain at 2% (the Bank of England’s target inflation figure) keeping pressure to increase interest rates lower than would be expected despite improving growth levels. It is also predicted that earnings will rise faster than inflation again keeping pressure on the Bank Base Rate lower in the short term at least.

Lack of new property supply has greatly affected the recent rapid rise in house prices (mainly in the South East). The Chancellor George Osborne announced support for building of more than 200,000 new homes, Help to Buy equity loan scheme extended to 2020 and support for future new garden cities such as 15,000 new properties in Ebbsfleet.

The Chancellor will expand the tax on residential properties worth more than £2m to those over £500,000. He said “those properties bought through corporate envelope will be required to pay 15pc tax duty. Many of these are empty properties held in corporate envelopes to avoid stamp duty. This abuse will end.”

Many people who invest in property do so as some form of retirement planning and the unexpected “rabbit out of the hat” in this budget was an increase in peoples ability to choose how they spend their pension funds upon retirement.

All tax restrictions on pensioners’ access to their pension pots will be removed ending the requirement to buy an annuity.
The taxable part of pension pot taken as cash on retirement to be charged at normal income tax rate instead of the current 55% tax rate
There is an increase in total pension savings people can take as a lump sum to £30,000

For money in our pocket income tax levels:

The point at which people start paying income tax will be raised to £10,500 from the increase to £10,000 already for this April.
The 40p High rate income tax threshold is to rise from £41,450 to £41,865 next month and by a further 1% to £42,285 next year

The budget deficit forecast for this year is 6.6% of GDP, 5.5% in 2014-15 then falling to 0.8% by 2017-18 with a surplus of 0.2% in 2018-19. This will lead to a 40 Billion decrease in interest payments on the National Debt a saving of £2000 per UK family per year!

The Chancellor announced a total Welfare Spending Cap of £119bn for 2015-16, rising in line with inflation to £127bn in 2018-19. This includes Housing Benefit and how this will affect rent levels for Landlords in this sector will remain to be seen.

I put this budget to Property118 readers for your comments.

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Tags: Budget 2014, Chancellor, George Osborne

Comments

Neil Patterson

8:27 AM, 20th March 2014, About 11 years ago

Reply to the comment left by "Andrea Peacock" at "19/03/2014 - 21:53":

Hi Andrea,

I think that is very possible "From midnight anyone buying a property for £500,000 or more through a company structure now has to pay a 15% stamp duty charge"

Although that is why you need a qualified accountant as the detail will emerge in due course.

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Andrea Peacock

9:10 AM, 20th March 2014, About 11 years ago

Hi Neil,
thanks for your thoughts, I will contact my MP for clarification, as I have had spectacular results from doing this before. I operate in the very expensive parts of Devon, in a national park so obviously highly protected against greenfield development and with a shocking affordability crisis for locals. I love a conversion and have bought several large properties including big houses,convents,an asylum, old hotels, pubs,nursing homes, farmyards of barns and split them into a number of smaller units and sold them to people who needed smaller cheaper houses , I have also kept several to put in my buy to let portfolio,putting new houses into the private rented sector, it is not unusual to have 30 or so blokes working on site during this process keeping loads of families afloat and providing probably 200 new homes over the years, none of this would have been possible or affordable with a 15% tax, disadvantaging us massively against the competition from the volume new builders who already had a 5% vat advantage over us. Moan Moan,
I will let you know what my MP says as it will probably concern other readers of 118 affected, perhaps in London and the south east
Regards
Andrea

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Andrew H

9:17 AM, 20th March 2014, About 11 years ago

Reply to the comment left by "Adam Hosker" at "19/03/2014 - 20:59":

I agree Adam, we need some more clarity here. Perhaps some of the Landlord Associations could offer insight?

Vanessa's Guardian link seems to back up the idea that the tax is not applicable to properties rented out to tenants (and therefore BTL investors/landlords), instead looking to target 'Buy to Leave' investors. But you make a good point. SDLT is obviously paid at the front end so how do you prove that the property will be rented out?

I can understand some of the reasoning behind this tax move to discourage 'Buy to Leave', not least the state of disrepair some of these properties are falling into. However, it's far too wide and will catch many other investor types in its wake. Andrea is a good example. For developers operating at this level it would almost be essential for them to trade as a commercial vehicle. There is no justification for them paying 15% SDLT.

Interested to hear from the Landlord Associations on this. Thanks in advance.

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Neil Patterson

9:31 AM, 20th March 2014, About 11 years ago

Reply to the comment left by "Andrea Peacock" at "20/03/2014 - 09:10":

Hi Andrea,

You sound Like just the sort of Maker Doer and Saver the Chancellor wants to encourage for the good of the UK.

I bet your properties are lovely 🙂

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Andrew H

9:51 AM, 20th March 2014, About 11 years ago

Article from FT:

The government has expanded its clampdown on homeowners who buy their properties through a company, in the latest move to deter wealthy foreign house buyers.

George Osborne extended the annual tax on homes owned through offshore companies from properties worth over £2m to those worth more than £500,000.

The tax does not apply when a home is rented out, in an attempt to encourage overseas buyers not to leave their UK homes empty. Homes worth up to £1m will be charged £3,500 a year, while those worth over £1m will be charged £7,000 a year.

“Many of these are empty properties held in corporate envelopes to avoid stamp duty,” Mr Osborne said. “This abuse will end.” The annual tax has so far raised five times more than the government originally expected when it was first introduced, he said.

The chancellor has also increased the rate of stamp duty paid on the purchase of homes through companies, to cover homes worth £500,000 and over. The 7 per cent stamp duty rate previously only applied to those worth £2m and upwards.
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This would seem to suggest that I have misunderstood and that the tax relief relating to properties "rented out to tenants" is not a relief on SDLT but instead, the ANNUAL taxes charged to offshore companies holding UK property? Therefore, no SDLT relief for UK companies purchasing BTL property?

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Michael Barnes

21:51 PM, 27th March 2014, About 11 years ago

Reply to the comment left by "Vanessa Warwick" at "19/03/2014 - 14:47":

Not sure where you get £800K from.

ONS gives inflation from 2000 in the region of 50%-60%, not 300%

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