The autumn statement of the 22nd November 2022 will mean more taxes for millions of people over the next few years. Chancellor Jeremy Hunt announced a broad range of tax increases and spending cuts, in an effort to save £55bn. The Office for Budget Responsibility expects disposable incomes to fall by 7.1% over the next two years as a result of the changes announced in the statement. This will lead to a big drop in the standard of living for many, with the cost of living increasing and wages stagnant. As a result, many people will no longer be able to afford to buy a house and will be forced to put their plans on hold.
Some of the announcements made in the autumn statement will directly impact the housing market. The Stamp Duty cut announced by the former Chancellor Kwasi Kwarteng in his mini-budget will no longer be permanent and will now finish on the 31st of March 2025. Stamp Duty will then return to the previous rates. Even the best conveyancing solicitors London, such as Sam Conveyancing worry that this stamp duty holiday will lead to a bottleneck in the property market in the first quarter of 2025, as we saw during the pandemic.
Richard Donnell, executive director of research at Zoopla, commented: “The government’s announcement of a reversal of the recently announced stamp duty changes in 2025 signifies a real need to reform stamp duty – a tax that is now starting to resemble income tax where it’s the top tax bands generating the greatest receipts. This reversal will make it increasingly difficult for prospective first-time buyers to get on the housing ladder in the coming years, particularly in London and the South-East, which accounts for the majority of stamp duty receipts.”
With support for energy bills changing after April 2023, as well as changes to council tax, household budgets will be put under even more pressure. The chancellor announced that the energy bill for an average household will rise by £500 and with the £400 electricity rebate also being removed, this means a rise of £900 per year for average households. Mr Hunt also announced that local councils could increase council tax by up to 5%. This will further squeeze household budgets and have a direct impact on the property markets.
The Chancellor further announced that the thresholds for income tax and national insurance contributions would be frozen. Many have called this a tax rise by stealth, as rising wages will mean more money going to HMRC. This will have an impact on first-time buyers as they struggle to save for a deposit at the same time as facing higher mortgage rates. Tim Bannister, Director of Property Science at Rightmove said it is likely that the squeeze on household budgets will slow down demand still further and this could lead to property prices falling next year, a view which many industry experts share.
Marc von Grundherr, director of Benham and Reeves, said that homebuyers, stretched to breaking point, may feel they have been ignored, with no meaningful initiatives designed to stimulate the UK property market.