Pros and cons for the PRS in Hunt’s 'small beer' Budget

Now the dust has settled on what many described as an ‘underwhelming’ Budget, we take a look at what two business leaders working in the Private Rented Sector (PRS) have got to say about Chancellor Jeremy Hunt’s pre-election fiscal measures.

The headline tax change was a further 2p cut in the National Insurance contribution, but Neil Cobbold, managing director of automated rental payment and client accounting specialists PayProp UK was doubtful that the reduction would make up for the impact of fiscal drag on employee income due to frozen income tax thresholds.

He added: “This tax cut is also only for employees and the self-employed, meaning letting and estate agencies that employ thousands of property professionals across the country will not be eligible for lower employer national insurance contributions.”

And while there was no specific mention of tenants in the Budget, he expressed concern over the proposal to scrap the Debt Relief Order application fee.

He said: “It may encourage more tenants in arrears to apply for DROs as it allows them to write off current rent arrears. However, tenants taking this route are likely to be evicted, and the DRO will remain on the tenant’s credit record, which will make it more difficult for them to find a rental property or take out a mortgage in the near future. Letting agencies would be advised to carefully monitor tenant credit checks to help ensure the right tenants are placed in affordable properties.

“Landlords considering selling their property have been given a tax boost by the Chancellor, with capital gains tax on residential property being reduced from 28% to 24%. This may encourage more landlords to realise any gains in property prices and sell up instead of continuing to keep a property in the private rented sector (PRS).

More pressure

“Anyone looking to acquire multiple rental properties will also be disappointed by the  abolition of the multiple dwellings stamp duty relief. Non-domicile property owners who hold a property within a foreign company may also be impacted by the new tax regime announced today. Details of the new regime will be published later in 2024.”

Gary Wright, CEO of alternative deposit providers, flatfair, was concerned that there was little in the hour-long speech for landlords or tenants.

He said: “While many in the PRS will welcome the 2p cut in NI, there was precious little in Jeremy Hunt’s overall package for the sector as a whole.”

“Hard-pressed tenants will remain hard-pressed - saving many just a few hundred pounds per year.

“The reduction in Capital Gains Tax – from 28% to 24% - may encourage some landlords to sell up and leave the sector altogether, putting even more pressure on already over-stretched supply.

“The lack of support for renters and landlords in the budget combined with the lack of available stock may continue to force rent prices up and put upward pressure on deposit payments which many struggle to find.

“Tenants desperately need the choice of a deposit alternative to lower their upfront costs. And we know that when offered this choice, more than 50% of tenants take up this option."

The absence of any measures to boost supply of homes in the PRS was a concern to both business leaders.

Cobbold said: “Across the PRS, the biggest change will be to short-term lets. The furnished holiday lets tax regime has been abolished, which currently makes it more profitable for second home owners to let out their properties to holiday makers rather than to long-term tenants to rent.

“While short-term let changes may cause a small uptick in PRS supply, the measures announced today will do little to impact the overall number of properties across the UK. Without concrete action to boost the number of both social and privately rented properties throughout England, Scotland, Wales and Northern Ireland, rents will remain high.”