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After a challenging mini-budget, the UK government’s Growth Plan brought about tax changes that affected the property market. Some of these changes were later reversed, but a few still impacted landlords and the overall property market. Mortgage lenders have also pulled deals, making it difficult for landlords.
In 2023, the housing market faces challenges due to rising interest rates and the cost of living crisis. However, UK rents are predicted to increase by 4%, while house prices may drop by 6% before recovering in 2024. City centres are expected to see price growth.
Landlords might find opportunities to buy properties at lower prices. Demand for rental properties is predicted to rise in 2023, partly because of the cost of living crisis, low wages, high mortgage rates, and the end of the Help to Buy Scheme. Due to the current economic situation, the government’s growth plan aims for a 2.5% trend rate, which has yet to be successful for landlords and businesses. As a result, mortgage products are now limited, and buy-to-let mortgages are more expensive.
Landlords should review their mortgage deals, especially if their fixed-rate period ends soon. In addition, lending criteria have changed, meaning properties must generate more rental income than before.
Stamp duty changes have raised thresholds, potentially stimulating the property market and encouraging first-time buyers. However, changes have yet to be made for limited companies.
The Energy Bills Discount Scheme will replace the Energy Bill Relief Scheme starting April 2023. If tenants pay their energy bills, landlords won’t be affected. However, landlords must pass on the discount if tenants are charged for energy usage.
The corporation tax rate will increase to 25% from April 2023 for companies with profits of £250,000 and over. The dividend tax’s nil rate band will reduce as well.
Capital Gains Tax (CGT) will require landlords to pay more when selling a property from April 2023. Income tax’s Personal Allowance will remain frozen, and the additional rate tax threshold will drop.
For landlords to remain successful, they should carefully review their mortgage payments and consider selling properties before the CGT allowance drops. However, new landlords shouldn’t be discouraged, as opportunities and tax incentives are still available.
The 2023 Rental Reform Bill will bring significant changes for landlords, including the abolition of Section 21, rights for tenants renting with pets, a new private renter’s Ombudsman, and more.
In conclusion, the UK’s economic growth looks better than originally predicted, but it’s still a challenging time for landlords. However, landlords can continue running profitable rental businesses by adapting to the new regulations and investing wisely.
If you need help to plan your taxes, please contact Tax Accountant at 0800 135 7323 or email info@taxaccountant.co.uk for expert advice.