fbpx

What to expect from the upcoming Budget

Jake Carter

March 3, 2021

The long-awaited budget will finally be revealed today following months of speculation.

There are many expectations for this Budget, including an extension to the stamp duty holiday, the introduction of a mortgage guarantee scheme and rising taxation levels.

Following Prime Minister Boris Johnson’s announcement last month, which detailed a four-stage roadmap for exiting lockdown, the UK has been in positive sprits.

As much of the Budget has already been leaked, it is expected Chancellor Rishi Sunak will look to extend the feel good factor within the nation.

SDLT holiday extension

Reports broke last month that Sunak intends to extend the current deadline for the stamp duty holiday by three months, from 31 March to the end of June.

The rumoured extension would also bring the end of the tax break in line with the easing of lockdown restrictions in the UK.

Data collected from Rightmove shows that if the deadline is not extended, 100,000 property transactions could potentially fall through.

Mortgage guarantee scheme

A mortgage guarantee scheme, which will allow homebuyers to purchase properties worth up to £600,000 with a deposit of 5%, is also expected within the Budget.

In order to encourage lenders, the scheme will reportedly involve the government offering to take on some of the risk that comes with low-deposit mortgages.

The proposal is based on the Help to Buy mortgage guarantee scheme, which ran until December 2016.

Corporation tax

It is rumoured that the Chancellor will reveal plans to increase corporation tax from 19% to 23% by the next General Election.

As well as this, there are expectations that Sunak will pause income thresholds.

This would not outright increase taxes, however would result in employees paying more as their salaries rise.

Business support

It is expected that the Treasury will provide a £520m package to support small businesses in improving their software and training under a ‘Help to Grow’ scheme.

This scheme would form part of Chancellor Rishi Sunak’s updated ‘Plan for Jobs’.

A £5bn scheme is also expected, which is designed to provide business such as pubs, gyms and hair salons with grants worth up to £18,000.

Furlough

The current deadline for the furlough scheme is set in April, however many anticipate this being extended once again.

This is due to lockdown measures being potentially extended until at least 21 June.

Industry expectations

Nick Morrey, product technical manager at John Charcol, said: “Given that this government seems to leak a lot of positive information before the actual announcement we are genuinely expecting a stamp duty holiday extension and 95% loan guarantee scheme.”

Morrey went on to say that the expected extension to stamp duty will provide a welcome relief to estate agents, solicitors and buyers all across the country.

He added that lenders will also be glad of it as their post-offer/completion teams were expecting the last two weeks to be the busiest in almost living memory.

However, Morrey explained that a straight extension would “effectively kick the can down the road”.

In the case of a straight three-month extension, Morrey expects to see a rush of demand as more buyers try to conclude before the deadline.

Morrey said: “Many will feel that when the holiday finally ends the property market might crash.

“We don’t think that is particularly likely since although prices may fall a little to reflect the higher than expected increase, the housing market has remained remarkably resilient when faced with adversity in recent years.”

Looking to the mortgage guarantee scheme, Morrey believes this will fill a gap in the market.

He said: “Having the government underwrite the largest part of a 95% loan should give them the confidence to service the gap they created between the have’s and have nots.

“This scheme is likely a resurrection of an older government scheme launched with Help To Buy back in 2013, so we are hoping lenders have the systems and infrastructure in place enabling them to bring products to market soon.”

In addition, Morrey outlined that enabling first-time buyers a route to home ownership is crucial to the longevity and stability of the property market.

“Without people to buy at the roots of the property chain people cannot move up it things stall,” he said.

Morrey added: “Rishi Sunak is likely to have the highest audience for a Budget speech for many years and may be hailed as the saviour of the property market as well as other titles bestowed by a grateful public.”

Mike Brown, director of Crystal Clear Financial Services, also pointed towards the likelihood of an extension to the stamp duty holiday deadline and the introduction of a mortgage guarantee scheme.

He said: “The Budget this year will be interesting with the outgoing stamp duty holiday and how the extension/phasing out will work on this, plus the introduction of the 5% deposit for buyers.”

Brown believes that the extension and introduction would create a lot of activity in the market, however he stresses that it needs to be the right activity.

Brown also looked towards the anticipation of tax changes, he said: “I expect to see a focus on what is planned with taxes and hopefully, the burden of this is shared across all areas of the taxation system and not just on corporation tax.”

Sarah Tucker, founder and managing director of The Mortgage Mum, believes that the rumoured extension to the stamp duty holiday is needed.

She said: “With the expectation of a stamp duty holiday extension and a 95% LTV scheme, we have lots to be excited about in the mortgage industry in anticipating the Budget.

“There have been so many delays with things such as searches and enquiries, and so many of our clients are getting incredibly anxious, so this would provide them with a huge relief.”

However, similarly to Morrey, Tucker would like to see the government taper the extension, rather than just extending it.

Tucker said: “We don’t want to be in the same position in June, with a load of new purchasers looking to save money.”

She also looked to the expectation of the introduction of a mortgage guarantee scheme.

Tucker said: “I am so excited for our first-time buyers who have a 5% deposit.

“We have a huge list of people waiting for this, and it is support that they need.

“We want more people getting on the property ladder, and this could really enable that to happen for so many people!

“Overall I feel our industry is being well supported, and though there are risks and considerations with the government offering so much support, I personally welcome it and am grateful for it.”


Sign up to our daily email