Photo by J.O. Property

Chancellor of the Exchequer Jeremy Hunt announced the Autumn Budget on Thursday 17 November, which was much-anticipated after the mini-budget back in September. The theme of the budget was tax rises and spending cuts. There were a few announcements that are set to impact HMO investors, the UK housing market, and the economy.

To better help you make the most informed decisions on your HMO portfolio, it’s important to stay up-to-date with the latest tax laws, legislation, and economic picture. So, let’s dive into the upcoming changes announced within the Budget Speech.

In this blog post, we’ll cover what HMO investors should know about the Autumn Budget. I’ll also offer a few tips to help you manage the impact of these announcements, navigate whatever’s to come, and prepare for any additional changes that could come in the future!

Property Taxes, Energy Prices, & Social Rents

We’ll start by covering a few of the measures announced that directly impact the UK housing market. While the increase to the stamp duty threshold was said to be a permanent change in the mini-budget, Hunt announced that this will now be time-limited. The threshold increase from £125,000 to £250,000 will only be in place until 31 March 2025.

In recent years, there has been much speculation about potential changes to capital gains tax, and this made it into the Autumn Budget. The annual exemption for capital gains tax will be halved from £12,300 to £6,000 in the 2023-24 financial year. For the following year, this will be halved again to £3,000.

As energy bills are a top concern for many people right now, Hunt announced the future of the Energy Price Guarantee scheme. This currently limits the average household energy bill to £2,500 per year and will be in place until March 2023. 

From April 2023, the energy price cap will be increased to £3,000 per year. For the following year, there’ll be a new approach, and a consultation is set to explore how the government will handle this moving forward.

Another big announcement was that social rent increases will be capped at 7% in England, which will directly impact social HMO investors and what they can charge for rent.

Other Tax Changes

Within the Autumn Budget, there were other measures announced that could impact HMO investors, what we pay in tax and the economy as a whole. Here’s a roundup of some of the other tax changes:

• Personal allowance threshold for income tax frozen until 2028 
• 45p top rate income tax threshold lowered from £150,000 to £125,140
• Dividend allowance cut from £2,000 to £1,000 next year and cut to £500 from April 2024

Many people felt the Autumn Budget didn’t go far enough to help people and businesses in the cost-of-living crisis. Surging inflation is hitting a lot of people’s finances and is impacting businesses across a range of sectors and the economy.

And within the housing industry specifically, some felt there could have been more announced in order to boost confidence in the property market.

How This Impacts HMO Investors

The tax changes announced mean HMO investors could face tax rises annually but also when selling properties. And as annual inflation has hit a 41-year high of 11.1%, this means our money won’t go as far, and this will impact our bottom lines.

As the energy price cap is set to increase again in April 2023 and we don’t know what’ll happen the following year, there’s still a great deal of uncertainty surrounding energy costs. For the properties where you include utility bills in rent, you’ll need to ensure you’re on the best deal possible and consider locking in when the right deal comes along.

While there are definitely ongoing challenges and more ahead, there are things we can do to improve profits and reduce costs – even during these difficult economic conditions! You’ll just need to stay on top of your HMO business and understand how you’re being impacted by rising costs, in addition to upcoming tax and industry changes.

3 Tips to Help You Navigate These Changes

1. Be prepared to make changes.

While there will certainly be more difficulties, there will still be opportunities – and I think the likes we haven’t seen for over a decade! But you need to prepare and be ahead of the game in order to be able to take advantage of this. Make sure your HMO business is agile and be open to making changes as needed.

2. Think ahead.

Don’t wait for certain measures to come into effect to start making changes. Be proactive and begin taking action now. Assess your HMO business and figure out what you need to do to navigate the upcoming changes. Focus on finding ways to future proof your HMO properties to ensure you can remain successful for years to come!

3. Stay on top of developing your knowledge.

We all know the property sector is fast-paced. To keep up, you need to be constantly developing your knowledge and staying on top of legislation, tax changes, the HMO industry, and local market. The more you know the easier you’ll find scaling your business – no matter the circumstances!

For more insights and advice on how to start, scale, and systemise your HMO portfolio, become a member of The HMO Roadmap! And if you’d like to talk about the Autumn Budget and ongoing challenges with other fellow investors, join us over on 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!