Friday's "mini-Budget", referred to formally by the Government as "The Growth Plan 2022", was anything but mini. Packed with tax cuts and simplifying measures, there was plenty to interest the real estate world. We highlight the key tax points of interest below (over and above the announcement that corporation tax will remain at 19%, and the headline grabbing personal income tax and NIC changes).
SDLT - reductions for residential properties
As trailed in the press ahead of Friday's announcement, cuts were made to SDLT on the purchase of residential properties. The threshold (or nil rate band) above which SDLT is paid in England and Northern Ireland will be doubled from £125,000 to £250,000 with immediate effect. The current SDLT nil rate band available for first-time buyers will also be increased, from £300,000 to £425,000, and the maximum value of a property on which first-time buyers relief can be claimed will increase from £500,000 to £625,000, again with immediate effect.
This is a welcome move for buyers, though it is unlikely to fuel the kind of increased activity in the housing market that we have seen with previous "stamp duty holidays". Today's change is a permanent one, so there is no immediate incentive for buyers to act quickly, and its overall effect is likely to be somewhat dampened by increasing interest rates.
The cut will also be welcomed by developers and house builders. The Government's clear intention to maintain a buoyant property market may well incentivise those in the industry to increase the pace of delivery of new homes to satisfy the greater demand.
Creation of regional Investment Zones
Regional Investment Zones will be introduced across the UK, with the aim of driving growth and unlocking housing in these areas. A number of time-limited tax incentives will be available over 10 years in these sites, along with more liberal planning frameworks.
As for the tax benefits, whilst the precise incentives to be offered remain a work in progress, currently under consideration are:
- 100% business rates relief on newly occupied and expanded premises;
- full SDLT relief on land bought for commercial or residential development;
- a zero rate for Employer National Insurance contributions on new employees working in a Zone for at least 60% of their time, on earnings up to £50,270 per year; and
- to incentivise investment, a 100% first year enhanced capital allowance relief for plant and machinery used within Investment Zones, and accelerated Enhanced Structures and Buildings Allowance relief of 20% per year.
Building on the existing concepts of Enterprise Zones and Freeports, the targeted tax reliefs on offer in Investment Zones should help to stimulate private sector investment and encourage development across the country, furthering the Government's levelling up agenda.
Annual Investment Allowance
The Annual Investment Allowance (AIA) threshold has been permanently set at £1 million, and will not revert to its previous level of £200,000 in April 2023, as was due to be the case. The AIA allows businesses to deduct 100% of the costs of qualifying plant and machinery up to £1 million in the first year. The allowance should support investment generally, and the fact that the £1 million limit has now been made permanent should provide stability and certainty for businesses when planning capital outlay.
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