The government recently announced their proposed Budget for 2021; following months of speculation with regards to how they would simulate a post-Covid-19 economic recovery, our questions have been answered. However, as professionals across the property sector, including investors and landlords, have suffered due to the Budget in recent years, how this year’s proposals will influence property investments is a topic that’s on all of our minds.
Dean Ward is the Managing Director of the DCW Group, a leading professional residential and commercial development consultancy which assists, guides and supports its clients through every stage of a development project. With over 17 years of industry experience within the world of property, Dean is certainly familiar with the effects of the Budget and how this year’s revelations promise to influence investments throughout 2021. Offering insight into these realities, he is sharing his expertise.
‘The 2021 Budget surprisingly isn’t a negative turn of events for property investors. In fact, there are many factors which prove to be a positive step in the right direction following the Covid-19 pandemic; stamp duty holidays have been extended until June 2021, the stamp duty threshold will reduce from £500,000 to £250,000 and mortgage providers will be able to lend up to 95%; these measures promise to stimulate the property market, meaning investors can trust in the fruitfulness of their ongoing, and new, projects. The public has of course experienced an incredibly difficult and uncertain year, meaning few have been in a position to save a substantial deposit – whilst financial uncertainty has become increasingly rife. Seemingly, the government is doing what it can to ensure the continued development of the property sector, protecting our investments in turn.
Meanwhile, proposed measures within the Budget not only appear to protect the appeal of our investments among potential buyers, they also look to benefit investors directly. For example, if you’re an investor who employs staff, you’ll be relieved to have heard that the furlough scheme is being extended until the 30th September 2021. Similarly, corporation tax rates for British businesses will not increase this year, nor between 2022 and 2023; for investors, this is an invaluable relief during what’s undoubtedly set to be a continued period of uncertainty and doubt.
Due to these proposals within the 2021 Budget, now is looking to be an advantageous time for property investors to finalise their projects and/or discover new ventures which promise to fulfil the needs of first-time buyers (whose deposits, which notoriously prevent young people from being able to join the property ladder, have been cut in half) and those who may have been heavily deterred by stamp duty tax. In any instance, the Budget is not spelling disaster for investors, rather it is forcing them to become more strategic and resourceful, enhancing their own due diligence to ensure they’re focusing on developments which reflect the wider implications of the Budget and the public’s needs. It is for this reason that I’m finalising a brand-new platform, DCW Insights, which uniquely collates vital due diligence information that any and all professionals within the property industry might need under one digital roof, saving vital time whilst minimising costs. 2021 will be a fragile year for us all and as we work to overcome the ravages of the Coronavirus pandemic, we must ensure we make well-informed, considered decisions.
Although corporation tax is at a stand-still currently, from 2023 the existing regime will change, instead becoming a tiered process whereby the tax rate payable by companies will be deciphered by their size and profits. Businesses with profits under £50,000 will continue to pay a 19% corporation tax (renamed a Small Business Profits charge), whilst larger firms earning over £250,000 in profit will have the rate increased to 25% and organisations falling between the two will receive tax relief on a tapered basis. Consequently, the next couple of tax years will be the most tax-efficient time for property investors to operate as a limited business – essentially, the Budget has noted beneficial steps, we must simply embrace and utilise them as best we can.
With regards to land resourcing, the 2021 Budget won’t have a monumental impact. The most drastic change, in my mind, is that businesses will be encouraged to demonstrate their losses; our wider attitudes will shift and this won’t be seen as a ‘bad thing’ or discouraging. Although small, this is important.
It’s also critical to note that there are financial grant schemes, as outlined in the Budget, to support property investment firms; tax rebates are available for employers who have paid for employee Coronavirus tests, recovery loves are opening in April with an 80% government guarantee for applications from £25,000, help to grow is providing free training for digital and management upgrades and flexible apprenticeship schemes are launching. However, as this is primarily aimed at businesses, independent, self-employed investors will face a freeze on personal allowances.
Arguably the best thing to be outlined in the Budget for property investments is that Capital Gains tax is not rising. Until 2026, this will be exempt up to gains of £12,300. Seemingly, despite widespread apprehensions, the Budget is not catastrophic for property investors. Thankfully, it appears to focus on reigniting the property sector, supporting the needs of both buyers and developers, all of whom have struggled in the wake of the pandemic. As such, there appears to be a fantastic window of opportunity over the next couple of years for us strengthen and enrich our portfolios, something every property investor is glad to hear.’
For more information about the DCW Group, visit: www.dcwgroup.co.uk. Meanwhile, to find out more about DCW Insights and to register to attend DCW Insights’ launch webinar on the 15th April 2021 at 10:30am, visit: www.eventbrite.co.uk.