Despite the Government recently dubbing Britain’s housing market ‘broken’, the Chancellor didn’t use his Budget to help fix it.
Yesterday’s Budget was brief, boring and bereft of any mention of the housing market. Coming only weeks after Secretary of State Sajid Javid published the Government’s Housing White Paper, perhaps that’s not entirely surprising. But many property firms and homebuyers did expect, and hope for, further information on some of the announcements outlined in February.
They didn’t get that detail, as housing took a back seat behind business, social care, grammar schools and self-employed tax treatment.
Landbay chief executive John Goodall summed up the feelings of a sector desperate to help fix Britain’s broken housing market.
“Zip. Nada. Zilch… Nothing….
“A bitterly disappointing, lacklustre Budget by Mr Hammond in terms of addressing the current UK housing crisis.”
Many other industry figures and organisations complained of a missed opportunity to address the unfairness of the current Stamp Duty system. A massive 74% of first-time buyers now incur the tax, compared to just 53% 10 years ago, according to Yorkshire Building Society, which campaigned for Stamp Duty to be changed to a seller’s tax.
No good news for landlords
Others lamented the fact that the Chancellor didn’t reverse the tax changes set to hit landlords from April. From then, they can no longer claim mortgage interest tax relief at their highest rate of tax, instead receiving what is effectively a basic rate tax credit. As a result many buy-to- let borrowers are set to see huge increases in their tax liability as the new measures are phased in over the next four years.
Hope Capital chief executive Jonathan Sealey said: “The Chancellor has passed up his last opportunity to reverse the damaging plans to restrict mortgage interest relief for landlords before they hit, or even to act on suggestions as to how he might ease the immediate impact.”
So, what did Hammond announce?
Self-employed tax hike
The biggest headlines today focus on the Chancellor’s attack on the self-employed, hiking Class 4 National Insurance Contributions by 1% next year to 10%, and again by 1% in 2019 to 11%. He also said he will cut the tax-free dividend allowance for company shareholders from £5,000 to £2,000.
Critics argue that narrowing the tax gap between these two ways of working is unfair, while the self-employed have no parity on benefits. Pete Mugleston, director at Online Mortgage Advisor, explained: “This push to make taxation equal just doesn’t factor in the obvious negatives self-employed people take on when they set up their own company. In equalising taxation, is the Chancellor also going to pay for their time off sick, negate the lack of employer pension, or offer job security?”
The Chancellor has also broken a manifesto pledge not to raise personal taxes, which makes the hike even more unpalatable for the self-employed, many of whom consider themselves wealth and job creators.
No white rabbit
Other housing tweaks included a year’s delay in the reduction in the filing and payment window from 30 to 14 days of Stamp Duty until 2018-19, a consultation on rent-a- room relief, and new rules to make sure that offshore property developers are subject to tax.
Hardly a white rabbit for the housing market then. These small measures, while welcome, only serve to highlight the fact that the housing market is on the periphery of government policymaking, despite the rhetoric.
How will borrowers be affected?
If you are self-employed, you already face challenges getting a mortgage, because of strict lending criteria on the high street and difficulty proving your income. Those who work for themselves find that advice from a mortgage broker with specific expertise and access to lenders who understand the self-employed is invaluable.
The role of independent advice and specialist lending is more important than ever as the self-employed face having less disposable income from next year. The same goes for buy-to- let landlords who will be disappointed that the swingeing new tax rules being phased in from April were not reversed, and the second home Stamp Duty surcharge was left untouched. Advice from an expert broker with strong relationships with buy-to- let lenders, including those who lend to limited companies, is crucial.
For everyone else, the financial pinch continues. The Resolution Foundation crunched the numbers following yesterday’s Budget to find that family finances will be squeezed well into the 2020s. Based on the latest forecasts it found real average earnings are only set to return to their pre-crisis peak (2007) by the end of 2022 – 15 years on.
The good news is that mortgage rates are still at record low levels, so mortgages are cheap to service once you can amass a sufficient deposit to access one. The key to getting your application accepted is to work with a qualified and regulated mortgage broker to make sure that you get it right first time.
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