Last month, pre-Budget, I pondered on what impact the October 30th event would have on…
Whichever way you look at it, this current period feels like one of stasis, as we all await what might be announced at the Budget on the 30th October.
Certainly, it appears from some leaks and the utterances of Cabinet Ministers that there are unlikely to be few untouched by what the Chancellor, Rachel Reeves, will announce that day.
Just in the last week the rumour mill has focused on the potential for increasing employer National Insurance contributions which of course will impact all businesses, including our CA member firms.
In a way, one suspects that the last few months has been spent looking at the taxes the Government could raise, given we are told there is a significant spending blackhole that will need to be filled. We will therefore see changes to CGT or Inheritance Tax? It seems likely.
The lead up to most Budgets tends to be dominated – at least in the property space – by requests to cut Stamp Duty in order to help generate activity, but so far those appear to have been few and far between.
Given the apparent need to increase taxes, perhaps there is a degree of ‘keeping our head down’ when it comes to stamp duty, just in case the Government decides it should actually be raising it rather than looking at cuts.
Certainly, it is a significant money raiser for the Treasury, and the Government might well decide it could secure more money from it, although many commentators, economists and think tanks have tended to suggest cuts to stamp duty actually bring more benefit to UK plc, and ultimately the State’s coffers, because of the increased number of transactions generated.
Cuts however do seem unlikely, unless perhaps we might see some tailored to certain buyer demographics. Traditionally this has meant cuts for first-time buyers but Ministers have said that when the existing temporary, higher stamp duty threshold runs out for them next April it will go back to its previous level.
Perhaps, instead it will look at a stamp duty cut for those at the other end of the property ladder, those who could potentially downsize but are perhaps put off by the significant stamp duty cost of moving.
Barclays’ research recently suggesting that 3.8m homes could be freed up for sale with a downsizing stamp duty cut but this would be a significant complication for the entire market to have to deal with, particularly conveyancing firms.
The further work it would generate for conveyancers is obvious, but also who might actually be defined as a ‘downsizer’? Would it be based on a drop in the number of bedrooms or other rooms in the property the client is moving to? Would it simply be for those over a certain age moving to a smaller property? What about people who are divorcing, for example, and moving into separate properties with less bedrooms/rooms? Would they qualify?
There is perhaps a good reason why no Government has done this yet, and it lies in the level of complication this could generate. And, you might well argue, if it is simply an incentive for older homeowners, then can you really justify this on age alone, plus the fact these individuals tend to be sitting in the largest properties anyway?
Or might it actually get people moving to free up homes for those who really need them? Barclays research found approximately 85% of owner-occupied homes have at least one spare bedroom making them ‘under-occupied’.
There could be potential here but, in a system which many already find complex, is the Government brave enough to add a further layer of complexity to it, particularly one that effectively benefits only a certain group of existing homeowners. I’m not sure the Government will want to go there just yet, if at all, and especially in its first Budget.
That said, there appears to be so much negativity around at present, that one also presumes they will need to come up with some ‘sweeteners’. Certainly, they have been very vocal on property-related matters already, with commitments to build more new homes, leasehold reform, planning changes, the Renters’ Reform Bill, etc, so it might well feel this is a positive route to continue moving down.
Will there be a replacement for Help to Buy, for example, or will this Government be unwilling to resurrect what was one of the flagship policies of the Conservatives? It is keeping its mortgage guarantee scheme but this is a low-cost commitment in the grand scheme of things.
Clearly we hope, and believe the Government will maintain a commitment to helping improve the buying and selling process – in areas like digital ID, upfront information, etc, we have heard positive noises, and seeing a significant improvement in transaction times and fall-throughs feels like a win-win for everyone.
What I do know is that we will all be watching this Budget with perhaps more interest than many others in the recent past. It is likely to be seismic for many people, including CA members, and could fundamentally shift our marketplace for many years to come.
Nicky Heathcote is Non-Executive Chair at the Conveyancing Association (CA)