Property investment in 2023

The UK housing market is undoubtedly going through a period of upheaval, and there are a few changes that landlords and investors should bear in mind as they continue to operate in the sector.

Over recent weeks, it’s safe to say that the UK’s political landscape has been in turmoil, with leadership challenges and changes, new policies and measures followed by U-turns and ongoing uncertainty as to how all of this will be resolved in the coming months.

Through the turbulence, some of the biggest moves affecting the country’s housing market - as well as the private rented sector (PRS) in which many investors operate - may have been overshadowed. Yet a number of the latest policy changes could play a major role in property investors’ decision-making as we move towards 2023.

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Stamp duty

After years of calls for the government to permanently adjust stamp duty to better reflect today’s property landscape - as opposed to the temporary cuts that were implemented during lockdown - the controversial mini-budget in September finally revealed a major overhaul for the tax.

The previous minimum threshold for paying stamp duty was £125,000, which was arguably incongruous with the country’s average house prices as they continued to soar. Now, the cost of a property up to £250,000 is exempt from paying any stamp duty, and the other thresholds have been revised too (see below).

Of course, property investors - and second home owners - must still pay the additional 3% stamp duty surcharge, while investors based overseas are also required to pay an extra 2%. But all buyers will still be making some huge savings on the tax bill for their property purchases, with the cut expected to boost people’s budgets, potentially keeping house prices afloat.

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Property or lease premium or transfer value/SDLT rate

Up to £250,000: Zero

The next £675,000 (the portion from £250,001 to £925,000): 5%

The next £575,000 (the portion from £925,001 to £1.5 million): 10%

The remaining amount (the portion above £1.5 million): 12%

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Corporation tax

A growing number of landlords operating in the UK now purchase their buy-to-lets through a limited company structure, rather than as an individual. This comes with the advantage of separate tax rules for investment property, which can benefit some investors.

Another major tax change announced by the government, after a reversal in the original plan set out in the mini-budget, means corporation tax will increase in April 2023 from 19% to 25%. While the top 25% rate only applies to companies with profits of £250,000 or more, which rules out the majority of limited company landlords currently in operation, it does mean a bigger bill for those earning above that amount.

For those that earn less than £50,000, the corporation tax rate will remain the same, meaning a large number will not be affected.

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Renters’ Reform Bill

This piece of legislation has been rumbling in the background for a while now, but it was put back in the spotlight again by former Prime Minister Liz Truss, as well as housing minister Simon Clarke, who assured the public it would be actioned during this parliamentary session.

While the full, final details of the reform are not concrete, it involves some big adjustments for the private rented sector. This includes potential changes to eviction rules (Section 21), replacing Assured Shorthold Tenancy Agreements with periodic tenancies, and scrapping rent review clauses as well as landlords’ ability to place blanket bans on who can and cannot rent their properties. You can find more details on the government website.

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Minimum energy efficiency standards (MEES)

At present, properties being let out in the private rented sector must hold an EPC certificate rating the property at a minimum grade of E. However, it is widely rumoured that this will be raised to a minimum of C in 2025, with some in the industry forecasting that this could be brought forward to help the government hit its emissions targets.

As such, huge numbers of property investors are already looking into ‘future-proofing’ their rental homes, with some selling older stock and replacing it with newer, more energy-efficient housing. Growing numbers of property investors are buying new-builds for this reason, as well as to attract tenants looking for top-rated rental homes - not to mention those hoping to minimise their household bills as costs rise.

While the current economic outlook remains uncertain, house prices are expected to return to positive growth from 2024 in many forecasts. The rental market is expected to outperform house price rises as it remains a crucial facet of the housing industry, with rental prices booming alongside growing numbers of first-time buyers holding off getting onto the housing ladder. For property investors, this means monthly yields should remain strong through turbulent times.

If you want to know more about the property investment opportunities we’ve got available at The Prestbury Advisory, get in touch with our team today on 01625 725 779, or email us at contact@theprestburyadvisory.com