Osborne is set to announce a second Budget this summer - so what will be affected?

The Chancellor of the Exchequer, George Osborne, stated earlier this month that a second Budget, dubbed the Summer Budget, will be declared on Wednesday 8th July this year, a month after issuing his first Budget announcement to parliament.

It revealed key changes such as an increase in tax-free personal allowance, a new Personal Savings Allowance, the introduction of a Help to Buy ISA, pension freedom changes and increasing the rate of the bank levy to name a few.

So what do we expect will be announced come July, and most importantly, how could the property market be affected?

Paul Wertheim of specialist lender Mint Bridging believes the second Budget will be about consumer spending: “…We cannot continue with inflation as low as it is, for a sustained period. To keep it low will have [a] devastating long term effect on the economy”.

Paul also predicts a higher tax relief on pensions will be introduced.

“Our kids have a ticking time bomb which is us, their parents. If we don’t save for our old age, potentially the next generation could see taxes go up considerably just due to the cost of looking after their elderly relatives.

“This, combined with the more flexible pension rules, will see more people investing pensions in diverse financial vehicles.”

In turn, Paul explained that this could cause a surge in ‘silver landlords’.

“This will fuel the already busy arena for HMO and studio flats. Most networking events attract many people dabbling in property, particularly HMOs. However, for the long term rationale, I do think the market will be saturated and rents (and so returns) will fall. This will leave the, by then, elderly landlord with a big problem.”

Paul also believes development lenders will benefit under the new government.

“Labour would have introduced mansion taxes, rent controls and even suggested rumours of 50-60 per cent tax rate. Whereas the Conservatives still see an Englishman's home as his castle… 200,000 new homes per year are needed to keep up with present demand. This is good news for development financiers.”

“A raise to the inheritance tax threshold on homes to £1m has already been pledged along with legislation to support home ownership with an extension of Right to Buy so there are unlikely to be many additional significant changes or policies regarding housing, commented Andy Knee of LMS.

"Despite being at the forefront of many peoples’ minds, housing policies are unlikely to take prominence in the next budget due to a lack of funds in order to meet tax break promises.

“The current set up is hugely detrimental to first-time buyers who are often competing with buy-to-let investors over housing while also facing higher interest rates and greater difficulties in securing a mortgage than their buy-to-let counterparts. Unless run as a proper business, it only seems logical that buy-to-let owners should face the same taxes as everyone else.

“There are certainly complexities involved in this and would require careful consideration. For example, if the government were to implement such a policy and decide that the benefit is forfeited upon remortgaging, it could make mortgage prisoners out of buy-to-let landlords – something we do not want to happen. We do not agree with penalising buy-to-let but at the same time, believe there needs to be a fairer system to support other buyers.”

Scott Marshall of bridging lender Roma Finance predicts the July Budget will announce three million new apprenticeships which, according to Scott, are needed in the house building sector.

“We simply can’t build new houses without a skilled labour force and I think this is a great opportunity to set out a plan for a sustainable house building policy going forward,” he said.

Scott will also be on the lookout to see if the Chancellor will introduce incentives such as tax breaks for builders, developers and landowners.

“With affordable house building at its lowest for many years, this needs to be turned round for a sustainable housing sector and to meet the aspirations of first time buyers who are locked in the rental cycle.

“The Government may also review its Permitted Development Rights that saw it easier to convert offices to residential premises.”

While the new rules are due to end in May next year, it would be interesting to see if this would be extended, or even implemented in Scotland.

Mark Tighe of capital allowances specialists Catax Solutions told Medianett that while commercial property transactions had increased, the Conservatives needed to explain its stand on tax relief.

"…The government will need to clarify its position on tax relief such as capital allowances, as this will provide a clear direction to businesses and enable them to develop, truly becoming the engines of the UK economy."

Although Ashley Ilsen of development lender Regentsmead stated that the conservative government had removed uncertainty within the market, he noted all was “not rosy”.

“…The pending EU referendum raises further issues on the horizon along with the growing disconnection between income and affordability and this is something the government needs to continue to address.”

Ashley highlighted that supply issues were also prevalent due to a lack of stock in key parts of the country.

“Naturally for a lender we remain cautious,” he concluded.


To give your views on what you would like to see announced in the summer Budget, click here.