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TODAY'S OTHER NEWS

Budget: Details of business rate changes and new development tax

The Budget has proven more generous than many expected - and with most property taxation left unchanged.

Chancellor Rishi Sunak has made some short term and long term changes to Business Rates, which will be of interest to agents and other property professionals; details of the new Residential Development Tax have also been revealed, with this being used to fund remediation work on dangerous cladding.

The high profile issues of Stamp Duty and Inheritance Tax were not mentioned in the Budget at all; in small print released after the Budget, one minor change to Capital Gain Tax is that the deadline for filing a tax return will be extended from 30 days to 60 days, from midnight.

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Early reaction from the industry has suggested frustration at what many see as Sunak missing an opportunity.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: "This could be regarded as a reprieve for the housing industry as many feared they would be clobbered one way or another, whether that was through higher capital gains tax or other measures which would have an impact on activity. When you don’t see much of anything, it is effectively the Chancellor saying he is happy with the way the market is operating at the moment and doesn’t wish to rock the boat. More help with regards to energy efficiency would have been welcome considering this is such a big target for the government at the moment. Good EPC ratings are still not a high enough priority for aspiring or existing homeowners but tax breaks might increase energy efficiency and retro-fitting supported by green mortgages and more generous green homes grants. However, it's important to not reduce the value or saleability of older, unmodernised properties or discourage their improvement."

The director of London agency Benham and Reeves, Marc von Grundherr, comments: It's disappointing to see such a brief mention for the UK property market in today’s Budget. The Chancellor has chosen to give the sector a bit of the cold shoulder with just a handful of headline figures, clearly believing his job is done having fuelled house prices to record highs via the recent stamp duty holiday. We need more homes to satisfy our ever-growing appetite for homeownership and an insignificant level of brownfield development is more of a slap in the face than it is an outstretched hand. As for the £11.5 billion pledged for 180,000 affordable homes, it’s a start, but hardly news given it was announced by [former Housing Secretary] Robert Jenrick a year ago."

And the managing director of Midlands agency Barrows and Forrester, James Forrester, says: “Time and time again we’ve seen the government pledge to fix the housing market using recycled rhetoric and funding from previously announced initiatives. Today was no different and reading between the lines, we can expect to see them continue to over promise and under deliver in their attempts to address the housing crisis. While Boris Johnson might not be a fan of recycling, his chancellor certainly is and so the 180,000 new homes pledged today is certainly no step forward. The only bone thrown to a nation of ravenous homebuyers starved of housing stock has been a scrap of properties built on brownfield sites. According to the government there are some 36,000 hectares of brownfield land across England alone, enough to deliver over 1.3m new homes. So even if the government does make good on its promise, it’s just a fraction of what they could, and should, be building.”

Here's a summary of the Sunak's measures: 

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Property and related issues:

There will be £5 billion to remove unsafe cladding from highest risk residential buildings; this will be funded through a Residential Property Developers Tax levied on developers with profits over £25m at a rate of four per cent. Some 31 housebuilders made that much profit in 2019.

There will also be up to 180,000 affordable homes  built on brownfield sites as part of a “multi-year housing settlement” of nearly £24 billion - the largest cash investment in a decade according to the Chancellor.

Some £11.5bn of these funds will go towards the construction of affordable homes, with the focus trained on developing brownfield sites.

Sunak told the Commons: “We are investing more in housing and homeownership with a multi-year settlement totalling nearly £24 billion. The government will provide £11.5 billion to build up to the 180,000 new, affordable homes the country needs annually, 20 per cent larger than the previous programme. We are investing an extra £1.8 billion, enough to bring 1,500 hectares of brownfield land into use, meet our commitment to invest £10 billion in new housing and unlock a million new homes.”

General Taxation:

- By end of Parliament taxes will be going down not up;

- Taper reduced on Universal Credit to offset the £20 a week cut recently implemented.

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Businesses:

- Business rate to be reformed "to create stronger High Streets" with revaluations every three years from 2023;

- Investment relief to encourage businesses to adopt energy-efficient measures; 

- A new 50 per cent business rates discount for companies in the retail, hospitality, and leisure sectors, up to a maximum of £11,000, lasting for one year.

Jobs and Industry:

- 26 per cent rise over this Parliament for skills spending;

- 560m extra spending on improving numeracy skills.

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Education and Culture:

- Extra £4.7 billion by 2024-5 but this will only see per-pupil funding to 2010 levels;

- This is on top of £14 billion announced in 2019.

- £850m for galleries, museums and libraries.

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Transport:

- Scheduled fuel duty increase cancelled for 12th year;

- Reduced air passenger duty for domestic flights within the UK;

- New tax for 'ultra-long-haul' international flights of up to £91;

- 50 local road upgrades as part of £5 billion road programme;

- Funding for buses, cycling and walking totalling more than £5 billion.

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Alcohol Taxation:

- "Radical simplification" of alcohol duty with 15 different rates reduced to six;

- The stronger the alcohol content, the higher the tax meaning some increases and some reductions.

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Economic Overview:

- Inflation, currently 3.1 per cent, set to rise to 4.0 per cent over the next year;

- Supply chain pressures "will take months to ease" as these are "shared global problerms";

- Office for Budget Responsibility revises upwards its growth forecast - economy should grow 6.0 per cent in 2021;

- OBR says unemployment will peak at around 5.2 per cent, which is lower than previously expected;

- Wages have grown 3.5 per cent in real terms since February 2020.

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New Fiscal Rules:

- Underlying public sector net debt should be falling as a percentage of GDP; and

- In normal times the state should only borrow to invest. That means everyday spending must be paid through taxation, he says.

  • Andrew Ireland

    It seems that business rates in their current format are here to stay, high streets will therefore continue to decline as per square meter they will carry higher rates than say a distribution warehouse ergo online competition.
    Residential property shortages are as much to do with rocketing prices as they are lack of physical bricks and mortar. The two elephants in the room (that no politician actually gets, I've tried) are low interest rates for residential lending which inflates price and of course the effect of individual inheritance on the house market. To purchase a property forget 4 times your salary plus 10% deposit, its more like 5 times your salary plus your inheritance plus 20% deposit to buy a typical house these days.
    The disparity between those that have and those that have not will continue to grow and eventually the gap will become unmanageable in political terms.

    (Andrew Ireland MRICS completed a research degree in property economics at Reading university and is a former agent and current accredited residential valuer)

  • Algarve  Investor

    Lettings almost completely ignored - bizarre. I agree that he has probably missed a trick here, in a Budget that has attempted to offer something for everyone while actually offering very little.

    Underneath all the boasts and braying, seems there will be some tough months ahead. And Sunak seems to have found Theresa May's magic money tree!

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    It's a relief that Labour are not in charge otherwise income tax and landlord tax would have been hit to support the unemployed and Universal credit payments for the can't work, won't work population.

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