Budget 2014 – “For Makers Doers and Savers”

by Neil Patterson

14:30 PM, 19th March 2014
About 7 years ago

Budget 2014 – “For Makers Doers and Savers”

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Budget 2014 – “For Makers Doers and Savers”

Budget 2014 – what are the main points for Property118 readers and the PRS.

The Office for Budget Responsibility (OBR) confirmed the GDP forecast to grow by 2.7% this year, 2.3% next year, 2.6% in 2016/17 and by 2.5% in 2018. GDP (economic output) will finally reach its pre-credit crises levels this year. This is a 3 fold rise in previous predictions last year.

The key hidden statistic given by the OBR in this budget was that they predict CPI inflation to remain at 2% (the Bank of England’s target inflation figure) keeping pressure to increase interest rates lower than would be expected despite improving growth levels. It is also predicted that earnings will rise faster than inflation again keeping pressure on the Bank Base Rate lower in the short term at least.

Lack of new property supply has  greatly affected the recent rapid rise in house prices (mainly in the South East). The Chancellor George Osborne announced support for building of more than 200,000 new homes, Help to Buy equity loan scheme extended to 2020 and support for future new garden cities such as 15,000 new properties in Ebbsfleet.

The Chancellor will expand the tax on residential properties worth more than £2m to those over £500,000. He said “those properties bought through corporate envelope will be required to pay 15pc tax duty. Many of these are empty properties held in corporate envelopes to avoid stamp duty. This abuse will end.”

Many people who invest in property do so as some form of retirement planning and the unexpected “rabbit out of the hat” in this budget was an increase in peoples ability to choose how they spend their pension funds upon retirement.

  • All tax restrictions on pensioners’ access to their pension pots will be removed ending the requirement to buy an annuity.
  • The taxable part of pension pot taken as cash on retirement to be charged at normal income tax rate instead of the current 55% tax rate
  • There is an increase in total pension savings people can take as a lump sum to £30,000

For money in our pocket income tax levels:

  • The point at which people start paying income tax will be raised to £10,500 from the increase to £10,000 already for this April.
  • The 40p High rate income tax threshold is to rise from £41,450 to £41,865 next month and by a further 1% to £42,285 next year

The budget deficit forecast for this year is 6.6% of GDP, 5.5% in 2014-15 then falling to 0.8% by 2017-18 with a surplus of 0.2% in 2018-19. This will lead to a 40 Billion decrease in interest payments on the National Debt a saving of £2000 per UK family per year!

The Chancellor announced a total Welfare Spending Cap of £119bn for 2015-16, rising in line with inflation to £127bn in 2018-19. This includes Housing Benefit and how this will affect rent levels for Landlords in this sector will remain to be seen.

I put this budget to Property118 readers for your comments.Budget 2014



Comments

Neil Patterson

14:36 PM, 19th March 2014
About 7 years ago

A fair amount of good news economically as we seem to be performing at least for now better than a lot of the Western World. However it seems to have been an awfully long time before we actually recover from the recession to the same output levels as before.

It has certainly been a long hard road.

14:47 PM, 19th March 2014
About 7 years ago

The Budget actually held little of interest to the smaller landlord.

I was disappointed that Stamp Duty Tax thresholds were not addressed.

The £250K threshold is stifling the property market around this price point.

It has not changed since 2000, yet property prices have changed dramatically.

If it had risen in line with inflation, it should now be at the £800K mark!

Good news for the P2P lending industry in that loans can now be included in ISA's.

Neil Patterson

15:00 PM, 19th March 2014
About 7 years ago

I believe the support base for Landlords comes from economic stability and recovery.

Help to Buy, Stamp duty, garden cities etc are all Micro economic policies, which while important, and certainly make a difference, are not as big a concern for Landlords as the economies overall health.

Without this the micro policies have no real impact.

Hence me being mildly encourage but still very cautious.

But hey Beer went down 1p 🙂

Hang on I am a wine drinker damn.

Adam Hosker

17:26 PM, 19th March 2014
About 7 years ago

Nothing much new from my POV, another disadvantage for Company Purchases of Buy to Let.

Andrew H

18:07 PM, 19th March 2014
About 7 years ago

Reply to the comment left by "Adam Hosker" at "19/03/2014 - 17:26":

Hi Adam,

Can you explain what you mean by another disadvantage for Company Purchases of Buy to Let? Thanks.

Adam Hosker

19:10 PM, 19th March 2014
About 7 years ago

@Andrew "15% stamp duty now due on homes over £500K bought through a company!"

Andrew H

19:38 PM, 19th March 2014
About 7 years ago

Reply to the comment left by "Adam Hosker" at "19/03/2014 - 19:10":

This "would not apply to properties rented out to tenants" so would not affect Company Purchases of Buy to Let property. Or have I missed something here?

Adam Hosker

20:59 PM, 19th March 2014
About 7 years ago

Reply to the comment left by "Andrew H" at "19/03/2014 - 19:38":

It does not say that in published budget document Andrew, but it is quoted in his speech to parliament. I wont try and be a tax specialist; I have no idea!

Stamp Duty is paid by the purchasor, so not sure how it can be rented out. Unless your buying a "tenanted property" to avoid it... Like i said, No idea!

21:41 PM, 19th March 2014
About 7 years ago

The Guardian have an article on the new tax for "Buy to Leave" investors which may give clarity to this issue:

http://www.theguardian.com/uk-news/2014/mar/19/george-osborne-buy-to-leave-investors-stamp-duty

Andrea Peacock

21:53 PM, 19th March 2014
About 7 years ago

Reply to the comment left by "Neil Patterson" at "19/03/2014 - 14:36":

Hi Neil,
I was wondering whether when I buy a large property (in excess of £500k) to split into several properties or to do up in the name of my company will I now be liable for 15% tax?
Regards
Andrea

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