Home News Autumn statement 2023 – What it means for Rooms For Let Landlords and Tenants

Autumn statement 2023 – What it means for Rooms For Let Landlords and Tenants

30th November 2023 Rooms For Let

Chancellor Jeremy Hunt unveiled his Autumn Statement 2023 in November.

In January 2023, Prime Minister Rishi Sunak set out his 3 main economic priorities for the coming term. Those priorities were to halve inflation, grow the economy and reduce debt. The Autumn Statement aimed to reinforce these commitments with a plan to see success on these fronts. With the rate of inflation at 4.6% in October 2023, having fallen from 11%, the government claim to have met at least one of those commitments.

However, it is unclear what steps the government took to allow them to claim this success was down to their actions or what those actions were.

Inflation was widely expected to fall as the large energy and fuel increases from the previous year dropped out of the equation.

The Bank of England increased Interest rates consistently month by month from March 2021 to October 2023. This was intended to reduce consumer spending and remove some of the inflationary pressures from the economy. As these steps were taken by the Bank of England, the government can hardly claim any involvement in this strategy or assisting in bringing the rate of inflation down with the interest rate tool.

The Government may be able to point to a hard line on public sector wage increases with rejection of pay claims for nurses, doctors and junior doctors, transport staff and others. Whilst some pay claims have been settled others are not and will likely result in further strike or other industrial action. While not agreeing to the higher wage demands may have some effect on inflation, reducing available funds in employees’ pockets and also saving the treasury these amounts, the cost of the industrial action, lost working days, missed appointments and NHS backlogs, costs to other businesses affected by industrial action, along with other increased costs could make this a far more costly and inflationary exercise.

How Does the Lower Inflation Rate Help the Rental Sector?

The Chancellor is using the reduction in inflation to suggest the economy is looking brighter and is a reason he is able to reduce certain taxes, namely a reduction in the rate we pay as National Insurance.

Although inflation has reduced significantly year on year, it is still well above Government and Bank of England targets of 2%. Energy prices will increase in January 2024 for most people as the Energy Price Cap increases. Food inflation is still stubbornly high.

Importantly, although inflation has dropped, prices are still rising by around 5%, this in addition to large price increases over the last 2 years so most people will continue to find it difficult to meet their every day expenses. Prices are most certainly not falling, possibly with the exception of petrol and diesel which can see some large falls but also increase fairly quickly.

There is every likelihood inflation could increase once again in the new year with the change to the energy price cap and still some pressure for additional pay settlements. With this in mind it is difficult to see how the economy is in the right place to implement tax cuts with expected further cuts in the next Budget in readiness for a 2024 General Election.

However, a falling inflation rate can lead to reduced interest rates. While the Bank of England looks unlikely to reduce rates in the near future, continued drops in inflation could change that perspective. This can lead to cheaper mortgage deals and more confidence in the sector for Landlords to purchase more rental properties and increase their portfolio.

While there could be some cause for optimism, care should be taken when considering increasing a rental portfolio bearing in mind inflation and interest rates could well continue on an upward trajectory for a while longer.

What Does the Autumn Statement Offer for Tenants and Landlords?

There have been calls for changes to stamp duty and capital gains tax which would have boosted the rental market and allowed landlords to retain more of their equity should they decide to sell. However, this support wasn’t provided in the Autumn Statement. There is a possibility some of these changes could be implemented in the budget which could boost an otherwise stagnant housing market.

However, with some tax cuts and increased benefits there is some good news for Landlords and tenants alike.

Support for Tenants on lowest incomes

The Chancellor has pledged to increase the Local Housing Allowance (LHA). This change will increase LHA to help cover rents and providing support for lower income people to stay in their homes. Whilst this is clearly a good thing for tenants and landlords, there is a likelihood the measure could fuel further rent price increases.

National Insurance Cut

The government is cutting the main rate of Class 1 employee National Insurance contributions (NICs) will be cut from 12% to 10% from 6 January 2024, with employees benefitting from January onwards. This is estimated to benefit over 29 million working people.

The average worker on £35,400 will receive a tax cut in 2024-25 of over £450. The idea is that this will reward work and sustainably grow the economy.

Self Employed Landlords Benefit from National Insurance Cut

Class 2 National Insurance contributions for the self-employed were abolished from April 2024. Therefore, self-employed taxpayers will no longer pay the £3.45 a week charge.

It is estimated this will save the average self-employed person £192 per year. This will benefit landlords making profits of more than £6,275 a year and who rent out their properties as their main job.

Benefit Changes For Those Who Cannot Work

For those that cannot work for legitimate reasons the government will increase all working age benefits for 2024-25 in full, by CPI inflation of 6.7%, and will maintain the Triple Lock, increasing the basic State Pension, new State Pension and Pension Credit standard minimum guarantee for 2024-25 in line with average earnings growth of 8.5%.

This step will help those on housing and other benefits with increases above the current rate of inflation.

In Summary for Landlords Renting Rooms and Properties.

Any tax reduction will be welcomed by most people, putting more money in to their pockets. However, depending on which side of the political fence you sit, these reductions seem to benefit the better off rather than those struggling to get by and those on lower incomes. The more a person earns, the more savings they will make with the NI changes. Therefore, lower income earners will see the least benefit although those at that level are arguably in greater need.

That said any reduction in tax will increase a persons disposable income and allows them to meet rent commitments so helping landlords in the process. This in addition to the benefits increases outlined above.

A landlord with rooms to let or complete properties, should hopefully find it easier to collect rent.

Do You Have or Looking for a Room To Rent?

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