Each year the Chancellor of the Exchequer stands before the pubic and announces their plans for the UK’s economy over the next few years. This year, the Chancellor is Conservative party member George Osborne, however with the General Election being held in 2015 this may be the second to last time he performs this duty.
This is one of the reasons why this year’s Budget is so important to the Conservative party; however it is also extremely important to everyone in the UK, including landlords. Due to the recession and the UK’s deficit the government has put austerity measures in place for the past few years, however now that the economy is improving will they continue? Here Just Landlords looks at everything we know so far:
Austerity Measures Will Likely Continue
Even though most people will not be happy to hear it, it is likely that George Osborne will announce that the austerity measures will remain in place for the foreseeable future. This will naturally be an unpopular decision with the public, however Mr Osborne claims that even though the economy is improving there is still a large deficit that needs to be dealt with. Opposition parties will likely use this as an opportunity to criticise the current government, however no matter which one comes into power next year they will still have to come up with ways to reduce the deficit. It seems as though the UK public will have to get used to the fact that no matter which government is in place in 2015 austerity measures will be needed to protect the future of the economy.
Businesses Will Benefit
Even though George Osborne is planning on introducing austerity measures, there is some good news for business owners. In an attempt to boost the UK’s economy, this year’s Budget will be focussed on helping and improving businesses across the nation. The Chancellor said: “We have a balanced recovery. The message in the Budget is that our economic plan is working but the job is very far from done. That means addressing long-term issues. We don’t export enough, don’t build enough. We need to boost exports to new emerging markets and support investment.” A business-focussed Budget could be extremely beneficial to landlords, as it means that it is likely the government will place more funding into construction and creating private rental properties.
Pay Brackets Will Alter
As usual, George Osborne will announce tomorrow his plans for income tax, tax free allowances and national income and so far it seems as though it will be higher earners that are mostly affected. The tax free allowance is expected to increase from £9,440 to £10,000 from 2015, however from 2014 the ceiling for paying basic rate tax will fall from £32,010 of taxable income to £31,865. Furthermore, the 40% tax rate will now kick in once a person owns over £31,866 instead of the current £32,011. This means that your tenants may soon take home less each month, and if they already have large amounts of outgoings this could lead to a higher chance of them defaulting on rent payments. To protect your business against this, it is advisable to invest in rent guarantee insurance.
Foreign Investors Will Have To Pay Capital Gains Tax
As the housing crisis has put many people and business in a difficult position, it is not surprising that many people are angered that foreign property investors are not hit with the same taxes as those from the UK. This is why the government are planning to make it mandatory for non-UK residents to pay Capital Gains Tax when they buy or sell properties within the UK, and as of April 2015 even UK residents who have moved abroad will be expected to pay the tax if they sell their UK properties. Hopefully, this will free up good quality properties that are currently empty, ultimately helping both the property and private rental markets.
Even though we have already heard some news on what George Osborne plans to announce in the Budget tomorrow, we are sure that there will be some policies he is keeping close to his chest until then. Next week, we will look into the Budget in more detail, and how it could affect your letting business in the upcoming years.