Autumn fiscal statement and what it means for the property and construction sector
Last week Chancellor of the Exchequer Jeremy Hunt outlined the Government’s fiscal statement and plans, setting out measures to attempt to bring borrowing and debt under control, following reports from the Bank of England that the UK is facing the longest recession since records began.
The Chancellor reversed nearly all of the measures in the mini-budget announced by previous Chancellor, Kwasi Kwarteng, including on stamp duty and investment zones, and set out further steps on taxation and spending.
The statement came just a day after the Office for National Statistics announced that inflation has now reached an eye watering 11.1% which is a 40 year high, and alongside the statement, the Office for Budget Responsibility (OBR) published its ‘scorecard’ on the policy measures as well its assessments of current and future economic indicators, including house prices.
You can find Cowgills’ full commentary on last week’s fiscal statement here but below is a summary of the announcements from the OBR and the Chancellor which we think are most relevant to the sector.
OBR House price predictions
The OBR forecasted that house prices could fall by as much as 9% by 2024 because of higher mortgage rates and the wider economic downturn.
They also predict that average interest rates on the stock of outstanding mortgages is expected to peak at 5% in the second half of 2024 which is the highest since 2008.
The OBR forecasts that house price growth will return in 2025.
Stamp Duty Land Tax (SDLT)
In the mini-budget on 23 September, the nil-rate threshold of SDLT was increased from £125,000 to £250,000 for all purchasers of residential property. The nil-rate threshold paid by first-time buyers was increased from £300,000 to £425,000.
The maximum purchase price for which First Time Buyers’ Relief could be claimed was also increased, from £500,000 to £625,000.
The Chancellor recognised that the OBR expects housing activity to slow over the next two years, so the Stamp Duty cuts announced in the mini-budget will remain in place but only until 31st March 2025.
The chancellor says this measure will “create an incentive to support the housing market and all the jobs associated with it by boosting transactions during the period the economy most needs it”.
Local authorities are to be given additional flexibility in setting council tax by allowing increases of 3% per year without the need for a local referendum. Further, councils with social care responsibilities will be able to increase the adult social care precept by a further 2% per year.
Annual Tax on Enveloped Dwellings (ATED)
ATED will be uplifted in accordance with September’s inflation figure (10.1%) for the 2023/24 ATED charging period.
The government will now refocus the Investment Zones programme which was announced on 23 September and whilst Mr Hunt did not ditch the investment zone plan completely, he made it clear that all existing local authority bids for the programme – which included a number of major housing schemes – will not be taken forward.
The Autumn Statement document said: “The government will use this programme to catalyse a limited number of the highest potential knowledge-intensive growth clusters, including through leveraging local research strengths.”
Treasury documents said the Department for Levelling Up, Housing and Communities will “work closely with mayors, devolved administrations, local authorities, businesses and other local partners to consider how best to identify and support these clusters, driving growth while maintaining high environmental standards.”
The first clusters are expected to be announced in the coming months.
From 1 April 2023, business rate bills in England will be updated to reflect changes in property values since the last revaluation in 2017. A package of targeted support worth £13.6 billion will be available over the next 5 years will support businesses as they transition to their new bills.
Business rates multipliers will be frozen in 2023/24.
Bill increases for the smallest businesses losing eligibility or seeing reductions in Small Business Rates Relief or Rural Rate Relief will be capped at £600 per year from 1 April 2023.
As the main rate of Corporation Tax will increase, previously proposed technical changes to the related capital allowance super-deduction rules are no longer required.
Rates for Company Car Tax will be set until April 2028 to provide long term certainty for taxpayers and industry in Autumn Finance Bill 2022. Rates will continue to incentivise the take up of electric vehicles although electric vehicles will not be exempt from Vehicle Excise Duty from April 2025.
Personal taxes and wages
The government is to reduce the threshold at which the 45p rate becomes payable from £150,000 to £125,140. Those earning £150,000 or more will pay just over £1,200 more a year.
Income tax and National Insurance rate thresholds will be held at current levels until 2028 rather than the previously planned-for date of 2026. This means that as wages rise in an effort to keep pace with inflation, the proportion of earnings that individuals pay tax on will increasingly bring more people into higher tax brackets.
The annual exempt amount for capital gains tax will be cut from £12,300 to £6,000 next year and then to £3,000 from April 2024.
The Dividend Allowance will reduce from £2,000 to £1,000 in April 2023 and to £500 in April 2024.
The National Living Wage will increase by 9.7% next year. That means, from April 2023, the hourly rate will be £10.42 which represents an annual pay rise worth over £1,600 to a full-time worker.
The Energy Bill Relief Scheme announced by Jacob Rees-Mogg on 21 September will now be reviewed. The scheme determines support for non-domestic energy consumers.
The government has announced a long-term commitment to drive improvements in energy efficiency to bring down bills and to achieve this target, a new Energy Efficiency Taskforce will be charged with delivering energy efficiency across the economy.
With regard windfall taxes, from 1 January until March 2028, Mr Hunt announced he will increase the energy profits levy from 25% to 35%.
The information was correct at time of publishing but may now be out of date.