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.