Mini-Budget 2022: what was announced for landlords?

This article was updated on 3 October to reflect the government's U-turn on plans to scrap the 45p income tax rate.

Today’s emergency mini-Budget, the first since Liz Truss was named as prime minister, focused on the government’s response to the cost of living crisis.

The new chancellor, Kwasi Kwarteng, announced several tax changes including a stamp duty cut and corporation tax freeze.

Read on to find out more details about how the cost of living Budget 2022 could affect you.

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• How much landlord insurance do I need?

Will buy-to-let landlords benefit from a stamp duty cut?

One of the headline policies of Kwarteng’s mini-Budget is a permanent reduction in stamp duty for people buying properties.

Here’s how it‘ll work:

• there’ll be no stamp duty paid on the first £250,000 of a property purchase, up from £125,000
• first-time buyers will only pay stamp duty on properties over £425,000, up from £300,000

Buyers of second properties, including buy-to-let landlords, will still have to pay a three per cent stamp duty surcharge.

It’s not been confirmed whether buy-to-let landlords, who pay a three per cent stamp duty surcharge, will benefit from the tax cut.

You can use the government’s stamp duty tax calculator to get an idea of how much you’ll need to pay.

Today’s reduction is similar to the stamp duty holiday between March 2020 and September 2021 that was introduced due to the pandemic.

The policy is part of the new government’s plan to ‘drive economic growth’ and aims to stimulate the housing market.

It’s likely to lead to higher demand for property, while supply may also increase if an active market encourages more people to sell.

Landlords looking to expand their portfolios could benefit from a greater choice of properties, however higher competition between buyers could push up prices.

Meanwhile, landlords looking to sell could be able to complete deals quicker and for a higher price.

Lower stamp duty could lead to higher house prices

As with the stamp duty holiday, there’s concern from some market commentators that today’s tax cut could artificially inflate prices.

According to the Office for National Statistics, average house prices in the UK increased by 15.5 per cent in the year to July 2022.

The average price of a UK property was £292,118 in July, up from £230,332 in February 2020 before the Covid-19 pandemic and the stamp duty holiday.

Higher property prices could cancel out any stamp duty savings and lead to higher mortgage repayments at a time when interest rates and inflation continue to rise.

Limited company landlords boosted by corporation tax freeze

Kwarteng announced that the corporation tax rate will be frozen at 19 per cent.

Under the previous government, the corporation tax rate was set to rise from 19 per cent to 25 per cent in April 2023.

This will be welcome news for landlords who own their properties through limited companies as they won’t be hit with a higher tax bill.

Earlier this year, Companies House data showed that more buy-to-let companies were set up in 2021 than in any previous year.

And now that the new government has scrapped the planned corporation tax rise, it could encourage more landlords to incorporate. Read our guide to setting up a property company for more information.

What does the reversal of the National Insurance rise mean for landlords?

National Insurance tax has been cut by 1.25 per cent. This is a reversal of the 1.25 per cent rise introduced in April 2022 and will come into effect from 6 November.

Before today’s emergency Budget, National Insurance was set to return to its old rate next April to coincide with a new ‘Health and Social Care Levy’ at 1.25 per cent. However, this has also been scrapped.

This policy is a major part of Liz Truss’s plan to lower taxes to stimulate economic growth.

The return to lower National Insurance rates will see landlords pay less tax, with those who earn the most getting the biggest benefit.

The Treasury estimates that the reversal of the National Insurance rise will give back £330 a year to 28 million people across the UK.

Income tax cut brought forward

An income tax cut of one per cent, first pledged by Rishi Sunak in March, has been brought forward from 2024.

The tax cut, which will come into force from April 2023, means people will pay 19p (down from 20p) to the pound on everything they earn between £12,571 and £50,270.

The government previously estimated the tax cut to be worth £5 billion and it’s the first time the basic rate has been reduced since 2008-09.

A plan to scrap the 45 per cent tax band for people who earn more than £150,000 a year was also announced, however this was reversed on 3 October following mounting financial and political pressure.

Read our guide on filing a landlord Self Assessment for more on buy-to-let tax returns.

Will there be another Budget this year?

Today’s announcement was called in response to a new government being formed and to address the cost of living crisis.

It wasn’t accompanied by analysis from the Office for Budget Responsibility, which means the government isn’t treating it as a full Budget.

Each year, the government is required to make two fiscal statements. In March, Rishi Sunak delivered a Spring Statement and it’s likely that there’ll be a full Budget before the end of 2022.

Landlords can expect more details on the Treasury’s long-term spending and tax plans, plus there may be an update on long-awaited rental market reforms.

In the meantime, keep an eye on our Knowledge centre for the latest news and updates on key issues affecting the buy-to-let sector.

Should there have been more support for landlords in the emergency Budget 2022? Let us know in the comments below.