Autumn Budget 2021: Landlord Update

The focus of today’s Autumn Budget and Spending Review was post-pandemic economic recovery. From grants to help landlords replace boilers, to a deadline extension for Capital Gains Tax, there are a number of announcements that look set to impact landlords and property investors.

Chancellor Rishi Sunak delivered his much-anticipated autumn financial statement today. Here are the key announcements that are of relevance to landlords.

Grants to help landlords replace gas boilers with heat pumps

The government’s Heat and Buildings Strategy, announced in early October, will allow landlords to access grants of £5,000 to replace gas boilers with heat pumps from April 2022.

Gas central heating systems are used in 85 per cent of rental properties. Replacing them with heat pumps forms part of the government’s plan to achieve net zero carbon emissions by 2050. Gas boilers will no longer be sold after 2035. But as an alternative form of heating and hot water, the heat pump is an expensive investment, costing between £6,000 and £18,000, depending on its size.

To accompany the Heat and Buildings Strategy, the Budget and Spending Review has pledged £3.9 billion to make buildings in England and Wales warmer and cheaper to heat and £450 million to grow the heat pump market in England and Wales, with the aim of reducing the cost of heat pumps by 25-50 per cent by 2025 making them more accessible to landlords and homeowners.

No replacement for the Green Homes Grant

With the Green Homes Grant having been axed not long after it was introduced, and the government’s focus on sustainability, it was anticipated that a replacement for the scheme would be announced in the Autumn Budget.

This was not to be however. Whilst the aforementioned Heat and Buildings Strategy will step in to assist with gas boiler replacements, this will not provide help with other forms of ‘green upgrades’, such as insulation, and secondary energy efficiency measures, such as double glazing and draught proofing.

Capital Gains Tax deadline extension

In spite of long-term speculation that Capital Gains Tax (CGT) would be increased as part of the autumn budget, no reform materialised. Instead, it was announced that the deadline for residents to report and pay Capital Gains Tax following the sale of UK residential property would be increased from 30 to 60 days from 27^th October 2021.

According to the Treasury, the extended payment window will provide taxpayers with adequate time to report and pay any Capital Gains Tax due.

One of the reasons behind the speculation around a rise in CGT is that it raises much revenue for the Treasury. According to the latest HMRC figures, receipts increased from £7.1 billion in 2015/16 to £11.5 billion in 2020/21, showing a considerable rise of 62 per cent.

The Chancellor’s decision not to make changes as part of the latest Autumn Budget means landlords selling properties in the near future won’t be liable for more tax. However, a future tax increase is likely to be on the cards, with Sunak himself having requested recommendations about how Capital Gains Tax could be reformed.

£65 million COVID-19 debt fund

Not strictly part of the Autumn Budget, a £65 million fund to help tenants in rent arrears due to the pandemic was launched by the Department for Levelling Up, Housing and Communities. The scheme will be operated by local authorities in England with a view to assisting 950,000 low-income households in rent arrears; 1.4 million who are behind with their council tax bills, and 1.4 million who are in arrears with their gas and electricity bills.

Whilst the fund has been welcomed as an opportunity to reduce homelessness following the end of the furlough scheme and the wind down of the evictions ban, there is talk amongst industry commentators that £65 million falls short of what’s really needed. Almost four million low income households are in arrears with their household bills, yet the money is being targeted at those most at risk of homelessness, leaving out a considerable number of people who need help.

Chris Norris, Policy Director at the National Residential Landlords Association, suggested that rent arrears caused by the pandemic are more like £300 million, and that the Chancellor needs to take things further if rent debts are to be removed as a risk to economic recovery.

Universal Credit support for tenants

Weeks after the £20 per week uplift in Universal Credit payments was ended, a newly launched £2 billion fund is reckoned to be worth an average of £1,000 a year for families claiming Universal Credit, many of whom will be tenants. From December 2021, the government will reduce the amount recovered from workers claiming Universal Credit from 63p to 55p for every £1 they earn.

According to the Resolution Foundation think tank, 4.4 million households have seen their incomes fall by £1,000 a year as a result of the uplift being cut. However, the Chancellor said it was always a temporary measure, and that the new change will plug that gap.

Making Tax Digital put back until 2024

As announced in advance of the Autumn Budget, landlords with income over £10,000 a year will have an extra 12 months to get ready for Making Tax Digital. The new rules for income tax Self-Assessment will now come into play on 6 April 2024.

Property funding and regeneration

It is predicted that investment in housing and housing-related activity will top £24 billion. This will include £11.5 billion towards affordable homes.

Further, the government has pledged £1.8 billion to help provide up to 160,000 new homes on brownfield land, together with an additional £5 billion towards the removal of unsafe cladding from the highest risk buildings.

Lastly, a new tax will target property developers who declare profits upwards of £25 million. The four per cent tax will help to fund strategies including unsafe cladding removal.

Industry commentators say that whilst new home funding and brownfield regeneration is welcome, the fact remains that insufficient supply of social rented housing is putting excessive pressure on the private rented sector. This is an issue set to rise, given that the Local Government Association (LGA) predicts that council waiting lists could increase to 2.1 million by next year.

Uncertain of what the future holds for landlords? Here’s a way to reduce your risk and guarantee your income.

As the economy remains uncertain, you may be seeking a way to guarantee your rental income as a landlord. homes2let has the solution in the shape of a guaranteed rent scheme.

Our scheme protects against the risk of rent arrears, whilst also including a comprehensive property management service, covering all the fees and costs involved in renting out a property. To learn more about how our rent guarantee scheme works, you are welcome to get in touch.