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Chancellor of the Exchequer Jeremy Hunt announced the Spring Budget on Wednesday 15 March, and there were a few policies announced that could impact HMO landlords. To help you make the most informed decisions on your HMO business, it’s important to stay up-to-date with the latest legislation, tax laws, and economic picture.
So, in this blog post, we’ll dive into what changes HMO landlords should know about from the announcements within the Spring Budget and the current state of the economy. I’ll also offer a few tips to help your HMO business remain sustainable and profitable no matter what lies ahead!
What Was Announced in the Spring Budget?
Corporation Tax
In regards to taxes, the big change that will impact some property investors is regarding the much-anticipated change to corporation tax. The Chancellor confirmed companies that earn more than £250,000 in profits would be required to pay 25% corporation tax. This rate of tax was previously set at 19%, and the change takes effect on 1 April.
This won’t impact the majority of landlords investing through a limited company but will likely affect those with larger portfolios the most. One of the big advantages of having properties held in a limited company is typically due to tax advantages, particularly for property investors with numerous properties. However, this has been weakened.
The change to corporation tax is something to consider if you’re earning near or above the threshold of £250k. And if you’re making the decision whether or not to invest in a limited company, we recommend seeking professional tax and financial advice to help you figure out what the best option is for you and your HMO portfolio.
With increasing costs, regulations, and taxes all happening at the same time, this can cause challenges and worries for property investors. But it’s something to make sure you understand and plan for in order to remain sustainable and profitable moving forward!
Energy Price Guarantee Scheme
Another announcement within the Spring Budget was that the Energy Price Guarantee would be kept at £2,500 for an additional three months from April. The guarantee was set to rise to £3,000 at this point.
This change is predicted to save a typical household £160. Wholesale energy prices fell from the peaks of last year, but prices are still high. Energy costs are expected to drop in July though, so this support is expected to help bridge the gap until then.
With this support, there could potentially be fewer rent arrears as the cost-of-living continues to impact tenants, and every little bit can help. But it also could help HMO landlords save money who offer properties with all-inclusive rent.
Investment Zones
On top of that, the development of 12 new investment zones across the UK was announced, with many locations being in the North of England and the Midlands. This kind of development could boost capital appreciation prospects over the long term in these areas.
So, if you’re investing in these regions or want to start investing in these areas, it may be beneficial to look at what locations could benefit the most from this regeneration and development. This could help you make successful long-term investments!
What Is the Current Economic Picture?
Inflation, rising costs, and the current state of the economy have been significant concerns for many people, including HMO investors. But there have been some positive signs in these areas.
In January, inflation dipped for the third consecutive month to 10.1%, according to the Office for National Statistics. Many economists had forecast that inflation would also drop in February; however, the price of food in particular increased, causing the annual rate of inflation to increase to 10.4%.
Inflation is expected to drop in the coming months. The Office of Budget Responsibility (OBR) forecasts inflation to fall to 2.9% by the end of 2023. Additionally, the OBR has predicted that the UK will not enter a technical recession this year.
The size of the economy is predicted to shrink by 0.2% across 2023, instead of the previously forecasted drop of 1.4%. Then, the economy is forecast to grow by 1.8% in 2024 and 2.5% in 2025.
How Can I Ensure My HMO Business Remains Sustainable & Profitable?
With so many changing and ongoing challenges, here are some of my top tips to help ensure your HMO business remains sustainable and profitable – no matter what happens!
1. Keep up with what’s going on in the economy and across the sector.
With everything going on, it’s naturally challenging to predict what exactly will happen with the economy and inflation in the coming months. But it’s important to stay on top of what happens and understand how it impacts your HMO business! So, keep up with the latest news on both the economy and the private rented sector.
2. Don’t assume things will only get easier.
This is a big one! We all need to make sure we’re prepared for any challenges ahead, and we really shouldn’t be thinking that things will necessarily get easier. It’s important to ensure your HMO business is agile and that you’ll be able to make changes as you need to.
3. Work with expert professionals to help you.
As there are so many challenges that come with being a HMO landlord, it can be helpful to have expert professionals on your team to help you! This includes having a mortgage broker, tax advisor, or property manager – depending on your needs. If you need HMO mortgage and finance solutions, get in touch with our partner mortgage broker.
For more insights and lessons on how to start, scale, and systemise your HMO business, sign up for The HMO Roadmap! And if you’d like to talk about the Spring Budget and current economic situation with fellow HMO landlords, join us in The HMO Community Facebook Group.
About the Author:
Andy Graham is the founder and the lead trainer at The HMO Roadmap! He is also the co-founder of The HMO Mastermind and Smart Property, a specialist HMO property investment and management company. He writes as a regular columnist in different magazines about a variety of HMO topics and is the host of The HMO Podcast! Follow Andy on Instagram!