The latest budget has introduced considerable challenges for businesses across the board, with the property and construction sector facing a particularly strong impact. The Chancellor’s new policy changes and tax increases are expected to affect the property and construction sector.
CGT Rates
Private landlords who hold rental portfolios personally will be relieved that CGT rates on the sale of residential houses won’t be increased from the current rate of 24%. Due to the upcoming abolition of no-fault evictions, and legislation that will make it easier for tenants to challenge rent increases, many landlords are considering exiting the buy to let market and selling off their properties. An increase in CGT rates on the sale of these properties would have been a nasty blow, but landlords will now be able to weigh up their options in the knowledge that rates will remain the same.
Increase in SDLT surcharge from 3% to 5%
The increase in the SDLT surcharge from 3% to 5% for companies and for individuals buying second properties will not be so welcome. Landlords looking to sell properties may find a drop in demand from buyers, especially if they were hoping to sell their properties with a tenant in situ, as SDLT payable by purchasers will increase with immediate effect, making the purchase of buy to let properties less attractive.
Property Developers: SDLT
Property developers who buy up plots of residential land for redevelopment will also be subject to the higher rates of SDLT which will increase their costs. This, coupled with minimum wage and employer’s national insurance increases seems incompatible the government’s targets for building more affordable homes as builders will need to pass on these increased costs when they sell the houses, and will need to fund the costs in the short term. Funding new building projects may also be more challenging for developers following the increase in CGT rates on the sale of shares from 20% to 24%. Many developers rely on private investment from high-net-worth individuals as an alternative to expensive bank borrowing. Often these investors are resident overseas but have favoured investing in UK projects due to the reasonable CGT rate. Overseas investors may now choose to invest in other markets, causing a source of financing to dry up.
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