The Chancellor’s summer statement centred around job protection, creation and retention as businesses reopen after lockdown. For the real estate market, he announced a temporary increase in the nil rate band for residential Stamp Duty Land Tax (“SDLT”) from £125k to £500k. The measure starts from today, 8 July 2020, running until 31 March 2021. This should save £4,500 an average on each residential transaction and resulting in 9 out of 10 people getting on or moving up the property ladder will pay no SDLT at all. It is anticipated to cost the exchequer £2.8bn. It is also anticipated that the additional 3 per cent rate for second homes will still apply.
The measures to secure jobs will directly benefit the construction sector, which is job intensive, as well as supporting tenants who will be in a more secure position to meet the rent payable to landlords.
There has been a real focus on the hospitality and tourism sectors where the standard VAT rate has been reduced to 5 per cent for six months, from 15 July until 12 January 2021. This together with the innovative “eat out to help out” initiative, where the Government will pay half of the cost of a meal up to a maximum of £10 per head from Mondays to Wednesdays this August. This initiative should provide some welcome assistance to these struggling sectors and thereby indirectly assist their landlords.
The Chancellor also announced significant investment in several infrastructure projects which should assist, amongst others, the construction sector. These measures come with a significant cost. A budget and spending review will take place in the Autumn. Over the medium term the Chancellor confirmed that he would look to put the public financing on a sustainable footing. No specific tax raising measures were made on how these would be paid for in the long run.
For further information, please contact your usual RSM advisor or a member of the real estate team.