Published: 28/11/2022 By AMIn his much-anticipated Autumn Statement, Chancellor Jeremy Hunt tried desperately to restore stability and confidence in the UK economy which had been rocked by his predecessor’s mini-budget.
With the UK now officially in recession, according to the independent Office for Budget Responsibility (OBR), Hunt said GDP is forecast to shrink by 1.4% in 2023, before returning to growth in 2024.
The Chancellor blamed ‘unprecedented global headwinds’ and insisted his plans would ensure a shallower downturn and higher long-term growth. He had a £55 billion fiscal black hole to fill, which was evenly split between tax rises and spending cuts.
But what did we learn about property in particular?
Stamp duty cuts to be time-limited and reversed by 2025
Only a few weeks after they were introduced, Hunt set out plans to reverse the stamp duty cuts outlined in Kwasi Kwarteng’s mini-Budget, saying he will ‘sunset the measure’ from March 31 2025.
It means there is effectively a stamp duty holiday for the next two years.
Back in September, Kwarteng had increased the point at which stamp duty is paid on property purchases from £125,000 to £250,000. At the same time, the nil-rate threshold for first-time buyers was increased from £300,000 to £425,000 on purchases worth up to £625,000.
Following Hunt’s announcement, the Treasury tweeted: “Stamp Duty cuts announced in the Growth Plan will now be time-limited, ending on 31 March 2025. This is to help the jobs & firms that rely on the housing market through the current challenges, while strengthening the public finances in the longer term.”
OBR predicts 9% house price fall
In its own economic forecast released in the aftermath of Hunt’s address, the OBR said house prices are set to drop by 9% over the next two years.
The organisation expects house prices to decline by 9% between the fourth quarter of 2022 and the third quarter of 2024. This, it says, will be driven mostly by higher mortgage rates as well as the wider economic downturn.
After this point, it forecast that prices will then recover slowly, remaining below their current level over the next five years.
It added: “There is significant uncertainty over this forecast given the sensitivity of house prices to mortgage rates and the recent volatility in the bond yields that drive pricing in the mortgage market.”
Hunt used the early part of his speech to the Commons to say that he would cut the tax-free allowance for capital gains in 2023-24 from £12,300 to £6,000 and then again to £3,000 in 2024-25 to, as the Treasury put it, restore public finances and make the tax system fairer.
It is likely to hit landlords hardest, but also those with second homes and those looking to sell their properties as capital gains tax (CGT) is subject to a much higher rate for residential property sales.
“Expect to see a decline in the number of disposals – people will hold off from selling their assets during unfavourable conditions. Or, if there is a delayed introduction for the new threshold, look out for a quick spike in sales as individuals and families try to beat the new implementation date,” Tim Walford Fitzgerald, tax partner at HM Fisher, commented.
What other measures were announced?
The Chancellor’s fiscal address also outlined the government’s plan for a Round 2 of the Levelling Up Fund, there to invest at least £1.7 billion in local projects across the UK, as well as an extension to the energy price guarantee for 12 months from April.
Furthermore, Inheritance Tax thresholds will be frozen for the next two years, while higher earners will start paying the top rate of tax (45%) when they earn £125,140, down from £150,000. Such a move could bring more landlords into paying the top rate of tax, which could in turn have implications for the profits they can make on their rental homes.
Elsewhere, the Chancellor revealed that the income tax personal allowance threshold will be frozen until 2028. Consequently, millions of people will end up paying more in tax as their pay increases – something that is commonly known as a stealth tax.
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