November 24th, 2023
The Chancellor’s Autumn Statement took place on Wednesday 22nd November, in what many believe provided lacklustre coverage of the housing sector. While some anticipated changes did not materialise, this article focusses on the challenges which were addressed in relation to the market, such as national insurance, promotion of house building and mortgage schemes.
Employee NICs Cut:
The unexpected announcement of a 2% cut in employee National Insurance Contributions (NICs) from January emerged as a notable highlight. This move aims to inject more money into people’s pockets, which may subsequently lead to improved affordability amongst consumers when it comes to housing.
However, industry experts express concerns about whether this alone is sufficient to address affordability challenges in the housing market. The additional take-home pay from this cut may contribute to an uptick in demand for properties, thus leading to a potential in increased interest in property transactions.
What about self-employed?
The statement carries several implications for self-employed individuals, including an increase in national living wage, review of I35 rules, and maintenance of the current VAT registration threshold.
Clients of ours who have employees should be aware that the National Living Wage will be extended, reducing the age threshold to 21-year-olds for the first time. Adults aged 21 and over will all receive £11.44 next year, which will require clients to consider budgeting and payroll management. It is also recommended that self-employed individuals should closely monitor the ongoing review of IR35 rules, as the potential changes could reshape the taxation landscape for them. Adjustments to tax and national insurance contributions will likely impact your financial planning.
Another positive for many CMME clients, particularly those with small businesses, is the Chancellor’s decision to maintain the current VAT registration threshold at £85,000 for an additional two years. Clients can breathe a sigh of relief, as this should prevent their financial strain and align with their interests in navigating tax regulations.
Mortgage Guarantee Scheme Extension:
The extension of the Mortgage Guarantee Scheme until June 2025 is particularly relevant to CMME clients and was generally welcomed. This scheme, designed to support first-time buyers with smaller deposits, allows buyers to put down a 5% deposit while the remaining 95% is covered by a mortgage.
However, concerns were raised about the scheme’s limitations, including the restriction of qualifying loans to 4.5 times income. Whilst this is designed to ensure responsible lending, it may limit the amount clients can borrow, potentially affecting their ability to purchase properties in certain markets with higher price points.
Renting Support:
The removal of the cap on Local Housing Allowance to the 30th percentile of local market rents was aimed at providing support for private renters. This move is expected to benefit 1.6 million households, with an average support of £800 in the next year. Critics, however, question whether these measures go far enough to address the challenges faced by renters.
Stamp Duty and Planning Reforms
Notably absent from the Autumn Statement were expected announcements on Stamp Duty reforms. Several industry experts expressed disappointment at this, highlighting that if reforms were not implemented, it could lead to additional costs for homebuyers. Those who were hoping for reforms to improve affordability may reconsider their options or adjust their expectations based on the existing stamp duty structure.
While Hunt’s Autumn Statement addressed various economic aspects, its impact on the housing market garnered mixed reactions. It presents both opportunities and challenges for those looking to explore the property market.
The measures to boost house building and extend the Mortgage Guarantee Scheme were seen as positive steps. However, the absence of anticipated Stamp Duty reforms and criticisms about the depth of planning reforms leave questions about the statement’s effectiveness in providing comprehensive support to the UK property market.
As the industry looks ahead, hopes are pinned on potential announcements in the Spring Budget to address the broader challenges faced by homebuyers and the property market as a whole. CMME continues its devotion to helping you navigate your finances in what continues to be an ever-changing economic landscape.