Our Predictions for the Autumn Budget 2021

The Autumn Budget 2021 will prove the old adage; that there is nothing more certain in life than death and taxes.

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Rishi Sunak will deliver his much-anticipated autumn budget just three days before Halloween. Not that he wants to put the frighteners on us, but he is expected to announce changes that will affect landlords.

Loss of Section 21 

Landlords will need to start preparing for sweeping rental reforms, such as the proposed elimination of Section 21 evictions and the implementation of lifetime deposits for renters.

Whether this is delivered within the budget, which always a good day to bury bad news, isn’t known. But what we do know is it’s going to happen soon.

So hints of the white paper on rental reform in the budget could happen, following a series of updates delivered at the Conservative Party Conference.

Tax rates on the rise

Team Rishi is considering raising Council Tax rates to cover the cost of the social care crisis, with any changes taking effect in April 2022. This will put a strain on your tenant’s finances and could mean younger renters returning home and falling out of the rental market.

Speculations failed to materialise in the March Budget, that there would be an adjustment to capital gains tax. This was kicked into the long grass but could be reconsidered in this month’s Budget. 

This has been on the cards for a while, with recommendations that capital gains tax might be raised to match income tax rates.

However, with the recent increase in National Insurance rates, the Chancellor is unlikely to announce any additional tax increases. 

Going green

Landlords who choose to go green are likely to get a mention too. After the Green Homes Grant applications were stopped in March this year after only six months, the government’s minimal success was heavily criticised in the media at the time.

The UK has committed to a 100% reduction in greenhouse gas emissions by 2050. While it may seem a long way off, action must be taken now to ensure those targets can be met. 

The UK is already at risk of meeting the 2035 target of cutting emissions by 78% (compared to 1990 levels) so it is reasonable to assume that we’ll see incentives in the budget to go green.

Restructuring 

There could also be a nod to restructuring the existing court system, to deal with the high volume of possession proceedings that resulted from notice period and extensions which occurred during the pandemic. 

The Chancellor has the perfect opportunity in the Spending Review, to ensure landlords have a court system that can ensure faster access to justice. For private landlords, the current method of obtaining possession through the courts is long, complicated, and expensive.

1. From April of next year, NI contributions will rise by 1.25%
2. To avoid a massive increase in payments, the state pension triple lock will be suspended in the 2022/23 tax year
3. The dividend tax rate would rise by 1.25%, meaning property investors will have to pay a higher tax rate on their earnings

Our predictions 

If we were betting people here at Mashroom, then there are six more predictions that could be made with some confidence.

1. Lowering the age at which graduates must begin repaying their college loans could go further. Graduates currently begin repaying their loans whenever they earn more than £27,295, but this might drop to £23,000 in the future. This Wednesday, the Chancellor may hint at just how far this could drop, which in itself could freeze some renters out of the market.
2. For the past eleven years, the tax on filling up at the pump has been frozen, but it may be time to change that.
3. The capital gains tax threshold is set to remain at £12,300 until 2026, but the Chancellor may fiddle with the rate instead.
4. As the climate issue worsens, the government may do more to connect the tax system with its commitment to achieving net-zero emissions by 2050.
5. This winter, higher energy expenditures are a major issue for households. The government might provide a lifeline to renters.
6. Then there are interest rates. Landlords may not hear mention of this much in the budget. Despite headline monthly inflation readings being well over the Bank of England’s 2% objective, plus pay gains of up to 7% in some industries, the Bank of England does not believe it is prudent to raise interest rates at this stage of the recovery. 

There was an increase in government debt accumulated during the pandemic, which the Chancellor will wish to maintain at the present Bank of England base rate, so that the cost of servicing that national debt remains low.

The Chancellor will then take to the television screen in the evening and opposition parties will do the same in the days that follow. Whether we will still be quoting Rishi beyond the paper headlines the next day is yet to be seen.

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