| Johnson puts corporation tax cut on hold –
Planned cuts to corporation tax next April are to be put on hold, Boris Johnson has told the CBI conference, with the money being spent on the NHS and other services. The Conservative leader told the conference that while big business did not want the UK to leave the EU, his withdrawal deal would provide the certainty “that you want now and have wanted for some time”. If elected with a Commons majority, the PM is hoping to get the agreement on the terms of the UK’s exit into law by 31 January, and begin talks with Brussels on a permanent trading relationship. In his address to the CBI, Labour leader Jeremy Corbyn said business had nothing to fear from a Labour government, arguing that while the richest would pay more, there would also be “more investment than you have ever dreamt of”. He also said Labour’s Brexit plan is the one that would actually “get it sorted quickly”, adding that Labour’s plan will im mediately end the uncertainty for businesses as it “won’t be ripping up our main trading relationship”. |
| Shorter-term fixed rate mortgages increase in popularity –
Shorter-term fixed rate mortgages have increased in popularity, with more homeowners opting for two-year fixed rate products, according to Paragon’s latest Financial Adviser Confidence Tracking (FACT) Index. The research, based on interviews with 201 mortgage intermediaries, found that two-year fixed rate mortgages accounted for 39% of mortgage business introduced in Q3 2019, up from 37% recorded in Q2. Whilst fixed periods of five years or more remain the most popular, the proportion of mortgage customers opting for a long-term fix fell from 51% in Q2 to 46% this time round. Fixed rate mortgages (89%) were still the overwhelming preference over tracker rate mortgages (9%). |
| Overseas buyers face higher stamp duty –
The Conservatives plan to introduce a 3% stamp duty surcharge for non-UK residents, whether the overseas buyer is an individual or a company. Rishi Sunak, the Treasury chief secretary, said the move could raise up to £120m, adding that this would be used to tackle rough-sleeping. Meanwhile, the Liberal Democrats would crack down on foreign buying of second homes with a stamp-duty surcharge on overseas residents buying such properties. |
| Labour plans extra property tax on foreign buyers –
Labour has pledged to put an extra tax on foreign companies and trusts buying property in the UK. It is part of the party’s wider tax plans and would charge offshore firms 20% for property purchases, on top of existing stamp duties and surcharges. Shadow chancellor John McDonnell said the levy, which will raise £3.3bn a year, was needed to “raise essential revenue for our public services”. The move comes after the Conservatives said companies and individuals who buy property in the UK, but are not tax resident here, will have to pay a 3% surcharge, raising an estimated £120m a year. The Lib Dems have also pledged to increase stamp duty for foreign buyers of residential property. |
| Self-employed struggling to get mortgages –
The self-employed face difficulties in getting mortgages due to lenders’ failure to understand their finances, according to mortgage broker Trussle. Contractors, sole traders, gig economy workers, freelancers, and even early-stage start-ups all make up the UK’s 4.8m strong self-employed workforce. However, 71% of self-employed borrowers believe it’s harder for them to get a mortgage, despite evidence suggesting they are more financially cautious than first-time buyers. “Lenders need to be more sophisticated about how they define the different types of self-employed borrowers. Their systems aren’t sophisticated enough to cope with the complexity of today’s self-employed market,” commented Trussle’s Ishaan Malhi. |
| Business owners potentially missing out on £3.74bn in annual interest payments –
Business owners could be missing out on £3.74bn in annual interest payments according to Aldermore. The specialist bank says £382.1bn is currently held in business bank accounts with high street banks, which could be earning just 0.02% in interest. Business owners, who are concerned about locking away their money for long periods of time, can earn almost ten times the interest of a business current account and still retain access to their funds, by using an easy access business savings account with an alternate banking institution. Ewan Edwards, director of savings at Aldermore, said: “Business owners who are worried about uncertainty impacting their business and want to have cash on hand should be aware that they can still earn higher rates and have instant access to their money”. |
| EU’s country-by-country reporting plans widely rejected –
Ireland was among twelve EU countries to vote against a proposal to introduce country-by-country reporting for multi-nationals. The move was designed to open up to scrutiny those companies which shift profits from high to low tax jurisdictions, such as Apple, Facebook and Google, to avoid paying an estimated $500bn a year in taxes. Ireland’s decision to vote against the proposed directive coincided with a warning from the Irish Fiscal Advisory Council (IFAC) that the country’s economy could collapse if there was a global clampdown on tax avoidance. The IFAC said half of all of corporate taxes paid in the nation come from just 10 global companies. Luxembourg, Malta, Cyprus, Latvia, Slovenia, Estonia, Austria, Czech Republic, Hungary, and Croatia were among the other countries to vote against the plans. Sweden voted against because amid fears the directive might water down their higher standards on transparency. France, Spain and the Nether lands were among those voting for the proposals. Germany abstained while the UK did not vote because it is in purdah before the general election. Elena Gaita, a senior policy officer at Transparency International, said: “It’s an outrage that member states have once again put the interests of big business above those of citizens.” |
| Let-to-buy loans rise in popularity –
A relatively unknown type of mortgage that allows families to move into a new home without selling their existing property is growing in popularity, as many struggle to shift their homes. Mortgage broker Trinity Financial has reported a 15% increase in the sale of “let-to-buy” mortgages in the past six months, while some 20 mortgage lenders now offer such loans. Let-to-buy allows borrowers to buy a new home while they keep their current property and rent it out. |
| Brokers helped back £15bn of lending in 2019 –
Brokers helped originate almost £15bn of lending last year, with most coming from new borrowers, according to an analysis from the NACFB. The association’s members helped arrange £14.9bn of loans in 2019, of which 65% were new business and 35% were from clients seeking to refinance. The research found brokers choose lenders based on a variety of factors but 37% value a low rate, 18% go by previous experience, 16% by best fit and 6% by speed. The most common reasons lenders turned away deals in 2019 were a client’s poor credit history, the sector being deemed too risky, the business lacking enough collateral, the lack of strong cashflow and the amount requested being too high, the NACFB said. The average deal size arranged by NACFB members was £450,145. |
| UK borrowing falls –
UK government borrowing in December was less than expected, at £4.8bn, and down £0.2bn compared to the same month a year earlier, according to the latest figures from the Office for National Statistics (ONS). As chancellor Sajid Javid prepares to boost spending in his March Budget, for the financial year so far – March to December – UK government borrowing stood 8% higher than a year earlier at £54.6bn. Overall public debt was £1.82tn at the end of 2019, an increase of £35.5bn on December 2018, while corporate tax receipts dipped 3.4% year on year, the biggest drop since 2012/13. |
| Yorkshire and the Humber a BTL Hotspot –
A survey led by Knight Knox, residential property experts, looked at the responses of 500 landlords in the UK and found that the majority of buy to let landlord with properties in Yorkshire and Humberside are feeling positive about the future of the rental market, with many thinking about buying more properties to rent in the future. |
| SME don’t have enough cash to pay debts –
Analysis by UHY Hacker Young found that the balance sheets of more than 13,500 SMEs showed the average firm had only 95% of the cash needed to pay debts due in the next 12 months. UHY audit partner Martin Jones said: “It’s worrying to see British SMEs struggling to pay their short-term debts already. Coronavirus disruption is going to make the situation even worse over the coming weeks and months. A lot of SMEs have seen their incomes drop precipitously almost overnight. Cost-cutting isn’t going to fix the problem – many will need emergency support from the government, as well as swifter payments from their debtors to make it through this crisis.” |
| Is a Stamp Duty holiday on the cards? –
On the day of the 2020 Spring Budget, the Bank of England announced it was cutting interest rates to 0.25% in a bid to curb the economic disruption caused by COVID-19. Hours after this decision was made, the Chancellor announced a series of reforms to bolster public services and provide financial relief to businesses and consumers. For what was originally touted as Boris Johnson’s first big opportunity to lay down his fiscal plan for the UK, the 2020 Spring Budget was very much dominated by COVID-19. Since then, a surge in COVID-19 cases has resulted in an indefinite lockdown period in a bid to stop the spread of the virus. The Government has responded by offering financial relief to businesses, including support grant funds, loan schemes for SMEs and large companies, and businesses rates relief. What’s more, the interests of consumers and investors is also being addressed. Since the middle of March, homeowners and buy-to-let landlords are able to apply for a three-month mortgage payment holiday. So far, over 1.2 million homeowners have taken advantage of this scheme, meaning they did not have to make any mortgage payments during this three-month period. It is important to note, however, that homeowners will still owe the bank the same amount of capital and it shall continue to accrue interest. The Government has not yet indicated when lockdown measures will be loosened. Some speculate a few more weeks while other believe a few more months is more realistic. Either way, the Chancellor will need to decide whether a second round of financial relief packages is warranted, or at the very least an extension of what has already been announced. Do we need a Stamp Duty holiday? When it comes to the property market, in particular, some commentators are worried that COVID-19 will have a direct impact on house price growth in 2020. This has less to do with confidence towards real estate as a safe and secure asset and more to do with the fact that prospective homebuyers will need to financially recover from the impact COVID-19 may have had. At the moment, it is difficult to tell whether this will be the case. Nationwide’s House Price Index for March revealed a 3% annual increase in house prices – the highest monthly price gain recorded since January 2018. This was attributed to the surge in demand for property witnessed following Boris Johnson’s resounding victory in the 2019 General Election. With the Government now discouraging people from moving to a new house unless absolutely necessary, there is likely to be a significant drop in the number of sales taking place. The question is how long it will take for momentum to return to the market once lockdown measures have been removed. With recent reports showing that house prices are likely to fall over the coming 12 months as a result of declining sales and a perceived lack of buyer/seller confidence, industry bodies like the RICS and NFB are in favour of a Stamp Duty holiday. They argue that by removing this tax for a fixed amount of time, buyers will be more willing to take on new property transactions – thereby boosting house sales and contributing to the rise of house prices. Of course, any such reform would need to be carefully considered and implemented. Stamp Duty is paid once a transaction has been completed, meaning there is a significant gap in time from when an enquiry is first made through to this tax being paid. This poses practical questions. For example, will the holiday period cover buyers who complete on a sale within a given timeframe? And would the holiday apply to all buyers, including buy-to-let investors? These are just some of the details that will need to be confirmed. Preparing from the coming months While not wanting to downplay the seriousness of COVID-19, it is important not to let negative forecasts about the property market overshadow the positive movements we saw during the opening months of the year. For now, the virus outbreak is posing immediate challenges which the Government is attempting to address through targeted reforms. Should the pandemic be contained over the coming weeks and lockdown measures lifted, I am confident we will see a subsequent surge in activity. However, should cases increase and lockdown measures continue for the summer, the Government will naturally need to revisit its relief schemes so that ample support is provided for businesses, consumers and investors. At this point, it might be worth considering an extension of the mortgage relief holiday and the introduction of a Stamp Duty holiday as well. |
| Chancellor unveils ‘bounce back’ micro-loans scheme –
Yesterday afternoon, Chancellor Sunak announced the Government was implementing a new micro-loan scheme for UK businesses. Mr Sunak shared that businesses will be able to apply for new ‘Bounce Back’ loans for up to 25% of their turnover for a maximum of £50,000 – with the Government paying the interest for the first 12 months. The loans will be 100% backed by the Government and available from 9am next Monday (4th May). Mr Sunak insisted that the process for getting this loan would be quick and simple: “There will be no forward-looking tests of business viability and no complex eligibility criteria… There will just be a simple and quick standard form for businesses to fill in.” We will share further details with you over the coming days. |
| House moves and viewings to resume in England –
House moves and viewings will be able to resume again in England from Wednesday, under new UK government coronavirus rules. |
| Insolvency law shake-up to protect UK companies during pandemic –
Legislation introduced in the House of Commons yesterday temporarily bans landlords from making legal claims for rent owed by businesses hit by COVID-19. The move, described by Colin Haig, president of restructuring trade body R3, as the biggest shake-up of insolvency laws for two decades, is designed to head off a rash of coronavirus-induced bankruptcies. The Corporate Insolvency and Governance Bill also includes a relaxation of “wrongful trading” provisions that hold bosses personally liable if a firm continues to operate when insolvent and introduces “light-touch” administration to allow companies hit by the pandemic more time to get back on their feet. |
| Homeowners warned against extending payment breaks –
UK Finance has written to the Financial Conduct Authority to warn that it would not be in the best interests of homeowners to allow borrowers to extend a three-month holiday on repayments to up to six months. The trade body said, “around 60% to 70% of customers can demonstrate affordability to resume full payments at the end of their current payment deferral”. There are concerns borrowers could run into difficulties when faced with the bigger interest bills while banks worry they will be accused of failing to provide enough information when customers sought an extension, leading to a rush of complaints. |
| Lenders give 1.9m mortgage holidays –
Figures from UK Finance show that 1.9m mortgage payment holidays have been taken by borrowers in the last three months, equivalent to one in every six mortgages in Britain. On average, £755 is being deferred each month. In addition to mortgage holidays, UK Finance said banks have offered 962,000 credit card payment deferrals and 689,000 breaks to personal loan customers during the coronavirus pandemic. |
| Lenders introduce raft of new borrowing restrictions –
The Times’ Kate Palmer reports on fresh hurdles for first-time buyers as lenders attempt to limit the number of risky borrowers on their books. Banks and building societies are declining mortgages to those with deposits gifted by family members, buyers with small deposits and those who have been furloughed or work in sectors at high risk of job cuts, for example. UK Finance says lenders fear the ability of borrowers to keep up repayments in the future and are factoring in a sharp fall in house prices next year. Palmer says landlords are also facing restrictions, with banks favouring properties with high efficiency ratings and limiting lending to portfolio landlords. |
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