Autumn Proposals

In this week's blog, it would be remiss of us not to have a look at some of the finer details of the Autumn Statement. However, to spin the analysis differently, rather than jumping around from pillar to post, we will attempt to focus on the suggested changes to the IFISA coming in May 2024 and the changes to planning and homebuilding, with a view on what they both may mean for the broader property-backed P2P industry.

Starting with a general run-through of events, the headlines will focus on 27 million workers who will receive a cut in National Insurance; the primary rate of Employee National Insurance (Class 1 NICs) has shifted by 2p from 12% to 10%, from 6 January 2024. The other highlights were the National Living Wage rising to £11.44 an hour, the pensions triple lock remaining locked, and in-work benefits increasing by 6.7%. Run is the operative word with our hasty run-through, as that's where the remainder of the statement becomes a little vaguer, with the overall tax burden reaching record highs and a downgraded growth forecast from The Office for Budget Responsibility to 0.6% for next year, it's a difficult read once you go beyond the headlines.

Buried away on page 84 of the full document, it reads, "Individual Savings Accounts: bring Long Term Asset Funds into the Scope of Innovative Finance ISAs from April 2024", with no further detail attached. Seemingly innocuous to most; however, I can assure you that ambassadors of the P2P sector who made it to page 84 will have felt a certain sense of relief when seeing that the product will not only continue to develop in the retail market it will also be expanded to include another asset class from outside of P2P, the FCA regulated LTAF or Long-Term Asset Fund. This will allow investors to invest in long-term illiquid assets, including real estate. Fund managers will sell these products via a Unit Trust or an OEIC and will serve to provide a regulated alternative for property-backed P2P utilizing the same tax wrapper.

These types of regulated asset classes are analogous to P2P, meaning they have similar functions but very different structures. Rather than competing with a regulated equivalent, it may expand the P2P audience to include a more comprehensive array of sophisticated investors as more and more people become curious about what else they can financially achieve with the IFISA. Interestingly, the one ISA per year limitation that prevented further diversification of portfolios has also been removed, so there now seems to be scope for substantial growth in the next tax year, a complete reversal of the initial murmurings that a slimming down of the available tax wrappers would be on the cards for the sector.

The document's second and equally important proposal is the proposed changes to planning, namely the length of time it's taking local authorities to approve significant infrastructure applications. Generation Z will never believe that if you go back several decades to an era pre-dating online purchasing, there was once a business model where if the pizza you phoned up for didn't arrive in 30 minutes or less, it was free. These latest proposed amendments offer a similar kind of approach. On the one hand, the government will allow local authorities to keep the planning expenditure from significant business planning applications; however, if the planning application goes cold on the pre-agreed timeframe, the councils must do the work for free.

Amongst other amendments proposed, the final point worth mentioning is the suggested changes to permitted development rights to scrap planning permission for property owners wanting to convert their homes into two flats. The one caveat is the appearance of the properties must stay the same, so we are talking about dividing walls rather than balconies. This is the most controversial change as it potentially and dramatically increases the number of people and cars in any given area, potentially having a hugely damaging knock-on effect on local communities, and the councils wouldn't get oversite of the situation until it was too late. Politically, the sting in the tail may be that those communities could be blue electoral suburban heartlands. The positives, though, are apparent if the standards can somehow be maintained and problems mitigated; it's removing red tape from smaller developers looking to undertake conversions that will boost the stock levels in the rental market and positively affect consumer rental prices, which is desperately needed, we can agree on that.

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