Steve Cooper
During the Budget announcement on Wednesday 16th March, BBC Correspondent Kamal Ahmed tweeted “Stamp Duty change and tax avoidances moves will mean higher taxes for larger Businesses. Smaller businesses appear winners” (1). He isn’t wrong.
Reduction in corporation tax to 17% by 2020 from 28% in 2008 and 20% currently (2) at the outset of the last Parliament will be a welcome change for Property Moose (PM) investors who want to see more of their investment yield distributed amongst PM SPV shareholders. This forms a major part of Osborne’s £7 Billion tax cut for UK businesses. Furthermore, investors and entrepreneurs will also benefit from £1,000 tax-free allowance per annum on earnings from property and micro-enterprise (8), incentivising small UK businesses to work hard to increase profits.
In addition to Small Businesses, the other big winners were Northern England and Wales. In an expansion of the £6billion Northern Powerhouse economic scheme, the Chancellor pledged to support 6 more infrastructure projects, giving the “green light” to HS3 rail link between Manchester and Leeds; £700m for upgrading flood defences in York, Leeds and Cumbria; expansion of the M62 cross-country motorway from 3 lanes to 4; a new tunnel road from Manchester to Sheffield (8); and significant upgrades to roads that connect the North East to the North West (2).
Alexandra Graham from the Property Moose Investment team comments; “Although not exclusively, a good proportion of Property Moose investment assets are in the North. There seems to be a proportional relationship between quality of infrastructure and house prices. Large scale investment in connectivity between major towns in the North could potentially mean increased property values which may benefit Property Moose Investors”.
During Prime Minister’s Questions, Wrexham MP Ian Lucas called for investment in links between North Wales and North West England airports, docks and major towns in order to stimulate the economic growth of the region; a request the Prime Minister agreed to dedicate resources towards (8).
A Northern Powerhouse indeed.
Property and construction were not forgotten by the Rt. Hon. Chancellor George Osborne, as new commercial stamp duty bands were introduced. As of 17th March 2016, commercial properties up to £150,000 in sale price will benefit from the higher 0% rate with just 2% applied to the next £100,000 and a 5% rate from properties sold above £250,000 (2). In context, Savills (3) predicts an upwards trend for commercial lease demand throughout 2016 meaning now, thanks to the Chancellor’s increase to small business rates, reduction of corporation tax and tax incentives to grow micro businesses, commercial property is a promising prospect once again.
Jessica Moore from the Property Moose Investment Team comments; “The increases in income tax threshold seems a great move. Like George Osborne said “It’s a budget for the future” and will enable people to keep more of the money they earn. That seems to be the driving force behind the increase in ISA allowance meaning people can look more towards investments for their future than the pension system which is obviously a good thing for alternative finance investors. Companies in the North got a real boost and that could bring real economic stimulus to the region which is positive for Property Moose investors who have investments in the areas benefiting from government investment. The only real disappointment for me was the absence of comment on NHS funding and how deep the cuts will be”.
Osborne’s statement was the final nail in the coffin for residential stamp duty increases. Although not a surprise, a groan was heard across the residential Buy-to-Let community (including 1/3 of MPs who are landlords themselves (9)). Owners of second homes and up to 15 investment properties will be subject to additional 3% stamp duty on the properties not designated as their primary residence (7).
With regards to personal taxation, the BBC reports (2) cuts in Capital Gains Tax “from 28% to 20%, and from 18% to 10% for basic-rate taxpayers. Simon Wickson from the Property Moose accounting team comments:
“Rate of Capital Gains Tax slashed from 28% to 20% for higher rate taxpayers and 18% to 10% for basic rate taxpayers. Buy to let investors won’t benefit as it does not apply to residential property. The reduced rate does apply to taxpayers where they have gains on disposal of shares in Ltd companies, which will benefit Property Moose investors if they sell their shares”.
The new Lifetime ISA introduced in the Budget 2016 will allow under-40s to save up to £4,000 per year until they turn 50 plus an addition 25% government contribution (2). To further incentivise savings and thus ease the burgeoning load on the pension system, the annual ISA limit was raised by the Chancellor from £15,000 to £20,000 (2). This has implications in the world of alternative finance where, in his Summer 2015 budget, Osborne introduced the option for investors to use their Innovative Finance ISA to invest through peer-to-peer lending platforms (4). When the Innovative Finance ISA launches in April 2016, equity and property crowdfunding will not be included however it is expected that it will be extended in the future to include more forms of alternative finance (5). In fact, a consultation document on Gov.uk (6) details the consultation on whether to include investment based crowdfunding.
Disclaimer and Legals
Property Moose does not provide any advice in relation to investments and you must rely on your own due diligence before investing. Please remember that property prices can go down as well as up and that all figures, rates and yields are projections only and should not be relied on. If in doubt, please seek the advice of a financial adviser. Your capital is at risk if you invest. This post has been approved as a financial promotion by Resolution Compliance Limited.
Property Moose is a trading name of Crowd Fin Limited which is an Appointed Representative of Resolution Compliance Limited which is authorised and regulated by the Financial Conduct Authority (no: 574048).
References
- https://twitter.com/bbckamal/status/710090584996888576
- http://www.bbc.co.uk/news/uk-politics-35819797
- http://www.savills.co.uk/research_articles/141564/197642-0
- http://www.lendingworks.co.uk/peer-to-peer-lending/innovative-finance-isa
- http://www.gocompare.com/savings/innovative-finance-isas/
- https://www.gov.uk/government/consultations/isa-qualifying-investments-consultation-on-whether-to-include-investment-based-crowdfunding/isa-qualifying-investments-consultation-on-whether-to-include-investment-based-crowdfunding
- https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508289/16_03_2016_Main_Guidance_Non_Res.pdf
- http://parliamentlive.tv/Commons (Wednesday 16 March 2024 - Commons Chamber)
- http://www.theguardian.com/housing-network/2016/jan/14/mp-landlords-number-risen-quarter-last-parliament-housing-bill
