Agents welcome Hunt tax change - but who knows what’s coming?

Propertymark’s chief executive Nathan Emerson has welcomed the dramatic government U-turn on taxes - but most importantly has retained the stamp duty cut announced early this month.

Propertymark’s Emerson says: “The Chancellor’s commitment to the Stamp Duty thresholds that better represent house prices will certainly help to restore some market stability and confidence which has taken a hit. Mortgage rates were already rising and we hope the wider announcements made today will translate into a settling down of that trajectory so buyers can proceed with more confidence that some of those additional lending costs will still be offset by Stamp Duty savings.”

Most individual agencies that have commented are also supportive of what seems a return to more consensus politics by Chancellor Jeremy Hunt.

Lawrence Bowles, director of research at Savills, comments: “Reversing these [other tax] cuts drastically reduces the size of the financial black hole the government has to clamber its way out of. That should reassure global financial markets that the UK remains a safe place to invest, bringing gilt yields down.

“This, in turn, will reduce the need for the Bank of England to hike base rates. It means we can expect to see mortgage rates peak lower and fall faster once we pass peak inflation … It may be a long time until we see mortgage rates back to where they were in recent years. But, for now, we do expect to see some of the existing downward pressure on house prices and transactions to be tempered – if only a little.”

Knight Frank’s finance spokesperson Simon Gammon says: "While we don't expect mortgage rates to fall in the short term, stability in the swaps market should slow the pace of rising mortgage rates relative to some of the worst case scenarios that looked possible in the days following the mini-budget.

"Only time will tell as to whether this is a temporary reprieve, however. Our advice to borrowers remains the same: act as soon as possible to review your options. In the event mortgage rates do fall, you can always look at your options to take advantage of any such move."

The director of lettings and sales agency Benham and Reeves - Marc von Grundherr - adds: “An extraordinary turn of events, quite literally, but one that should help strengthen a property market that was starting to wobble under the pressure of increasing mortgage rates and dwindling buyer sentiment.

“While maintaining a cut to stamp duty will help stimulate buyer demand within the market, overall market health will be far better maintained by stabilising the mortgage sector and our ability to fund a property purchase in the first place. We should now see this with pressure easing, making the threat of further mortgage rate increases over the coming months less likely.”

And James Forrester, managing director of Barrows and Forrester, comments: “It’s impossible to tell just what direction the economy will head following the latest government spectacle, but today will bring an air of positivity to what was quickly becoming a beleaguered property market. Stability in the gilt markets will bring positive movement for those looking to borrow. But it’s important to understand that we aren’t going to return to a sub one per cent base rate and homebuyers must be prepared to pay more in mortgage costs when climbing the ladder.”

Here is the government’s full statement on reversing most of the provisions of the mini-Budget:

Following conversations with the Prime Minister, the Chancellor has taken these decisions to ensure the UK’s economic stability and to provide confidence in the government’s commitment to fiscal discipline. The Chancellor made clear in his statement that the UK’s public finances must be on a sustainable path into the medium term.

Today’s announcement represents another down payment following the reversal of the corporation tax cut announced on Friday 14 October by the Prime Minister. The Chancellor will publish the government’s fiscal rules alongside an OBR forecast, and further measures, on 31 October.

In his statement the Chancellor announced a reversal of almost all of the tax measures set out in the Growth Plan that have not been legislated for in parliament. The following tax policies will no longer be taken forward:

- Cutting the basic rate of income tax to 19% from April 2023. While the government aims to proceed with the cut in due course, this will only take place when economic conditions allow for it and a change is affordable. The basic rate of income tax will therefore remain at 20% indefinitely. This is worth around £6 billion a year.

- Cutting dividends tax by 1.25 percentage points from April 2023. The 1.25 percentage points increase, which took effect in April 2022, will now remain in place. This is valued at around £1 billion a year.

- Repealing the 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) from April 2023. The reforms will now remain in place. This will cut the cost of the government’s Growth Plan by around £2 billion a year.

- Introducing a new VAT-free shopping scheme for non-UK visitors to Great Britain. Not proceeding with this scheme is worth around £2 billion a year.

- Freezing alcohol duty rates from 1 February 2023 for a year. Not proceeding with the freeze is worth approximately £600 million a year. The next steps of the Alcohol Duty Review announced in Growth Plan 2022 will continue as planned. The alcohol duty uprating decision and interactions with the wider reforms to alcohol duties under the Alcohol Duty Review will be considered in due course.

This follows on from the previously announced decisions not to proceed with the Growth Plan proposals to remove the additional rate of income tax and to cancel the planned increase in the corporation tax rate.

Taken together, these changes are estimated to be worth around £32 billion a year.

The government’s reversal of the National Insurance increase and the Health and Social Care Levy, and the cuts to Stamp Duty Land Tax, will remain benefitting millions of people and businesses. The £1 million Annual Investment Allowance, the Seed Enterprise Investment Scheme and the Company Share Options Plan will also continue to further support business investment.

Energy bills support review

The government has announced unprecedented support within its Growth Plan to protect households and businesses from high energy prices. The Energy Price Guarantee and the Energy Bill Relief Scheme are supporting millions of households and businesses with rising energy costs, and the Chancellor made clear they will continue to do so from now until April next year.

However, looking beyond April, the Prime Minister and the Chancellor have agreed that it would be irresponsible for the government to continue exposing the public finances to unlimited volatility in international gas prices. A Treasury-led review will therefore be launched to consider how to support households and businesses with energy bills after April 2023. The objective of the review is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need. 

The Chancellor also said in his statement that any support for businesses will be targeted to those most affected, and that the new approach will better incentivise energy efficiency.

The government is prepared to act decisively and at scale to regain the country’s confidence and trust. The Chancellor stated in his speech that there will be more difficult decisions to take on both tax and spending. This means doing what is needed to lower debt in the medium term and to ensure that taxpayers’ money is well spent, putting public finances on a sustainable footing.

In light of this, government departments will be asked to find efficiencies within their budgets. The Chancellor is expected to announce further changes to fiscal policy on 31 October to put the public finances on a sustainable footing.