How does the Government’s mini-budget affect buy-to-let landlords?

The emergency mini-budget announced last Friday introduced changes that affect buy-to-let landlords across the UK. The mini-budget is the first of its kind since Liz Truss became prime minister and focuses on the government’s response to the cost-of-living crisis.

Among other things, the new chancellor of the exchequer, Kwasi Kwarteng, announced tax changes, including a stamp duty cut and corporation tax freeze.

Although the news might seem worrying, the mini-budget also opens up new opportunities for landlords. To help you understand both the positives and the negatives, we’ll go into more detail about how the mini-budget of 2022 can affect your property investment.

Main points that affect buy-to-let landlords:

Below, we have highlighted the main points of the mini-budget that could affect property investments and buy-to-let landlords:

  • As of 2023, the basic rate of income tax will be cut to 19p, with the 45% of higher rate ‘abolished’ and will be replaced with a single rate of 40%
  • In England and Northern Ireland, Stamp duty land tax will be cut. The limit of buyers has been raised to £250,000 or £425,000 for first-time buyers
  • Corporation Tax will remain at 19% as the planned increase has been cancelled
  • Planning reforms to support the development of infrastructure projects and increase housing supply are set to be announced in the coming months
  • National Insurance contributions will not increase as planned and will be reversed from November the 6th.
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Will buy-to-let landlords benefit from a stamp duty cut?

As mentioned above, one of the main headlines from Kwasi Kwarteng’s mini-budget is a permanent reduction in stamp duty for people buying properties. 

Here is a breakdown of how it will work:

  • No Stamp duty is to be paid on the first £250,000 of a property purchase – up from £125,000
  • First-time buyers will only pay stamp duty on properties over £425,000 – up from £300,000

For more information, you can use the governments stamp duty calculator to see if you will pay and how much.

These changes will likely lead to a higher demand for property, meaning that buy-to-let landlords will be able to sell quicker. If supply also increases, property investors could have a lot more properties to choose from.

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Will buy-to-let landlords benefit from an income tax cut?

This is a straightforward benefit for buy-to-let investors. The income tax cut means that people will pay 1p less (19p down from 20p) to the pound on everything that they earn.

Additionally, the government’s scrapping of the 45% tax band for people who earn more than £150,000 a year will mean that anyone who earns over £50,271 a year will pay 40p to the pound in income tax. This means that as a landlord, you will benefit from lower tax bills.

How will planning reforms affect buy-to-let investors?

Even though it’s still a few months away, it looks like the government is trying to simplify the process for obtaining planning permissions. If this happens, more properties can enter the market and the supply will increase. Read our latest article on supply vs demand here.

Interest rates vs increase in rental income?

Another factor to consider is the increase of interest rates. A lot of investors and people across the UK are concerned about this. However, as we mentioned in our previous article, rental income has also increased. Moreover, in comparison to the 2% increase in interest rates since the start of 2022, rent has gone up far more at a rate of 11.4%. With some areas like Manchester seeing nearly a 20% increase, the buy-to-let market is evidently stable and growing.

Investing with Closefield Property

If you’re interested in buy-to-let investment, we can assist with all parts of the process and offer detailed insights into the best areas of the UK for property investment. Get in touch with us today to book your first consultation with our experts!