The Chancellor’s annual budget announcement had already made some positive allowances for retail and hospitality businesses, helping to cut down the overheads on operating within a Commercial Premises. However, since Covid-19 has become more prevalent in the UK, the government has gone even further to support small businesses and mortgage payers. This is some welcome news for the property industry.
Hospitality, retail and leisure business rates holiday – saving up to £25,000 per business
The temporary removal of Business Rates for companies in a commercial premise with a rateable of less than £51,000 has given thousands of independent businesses increased confidence that they will be able to cover overheads and hold on to their premises for the coming tax year. However, closure of public spaces to aid social distancing is likely to perhaps cancel out this goodwill, so we look forward to hearing further news from the government on additional support available to these types of businesses.
Once social distancing ends, it’s likely the pausing of Business Rate payments will attract new start-up businesses to join the high street where once it might not have been affordable. It may also encourage established businesses to take the leap to upsizing their premises to grow their businesses when previously this may not have been viable. It certainly buys businesses time and little more freedom to focus on their long-term plans.
£3,000 cash grant for Small Businesses with rateable values below £15000
A cash grant of £3000 is significant for a very small business – it could perhaps be spent towards internal decorations or equipment to upgrade the premises and the customer experience, or invested in extra staff to increase opening hours.
Residential property budget adjustments for 2020
Mortgage payment holidays of 3 months are available to private homeowners and buy-to-let Landlords. This should help families and tenants that are struggling to make ends meet during the Coronavirus restrictions, particularly anyone that has needed to self-isolate and is on statutory sick pay, and families in the hospitality and leisure industry that may have had hours or wages cut.
How could the mortgage payment holiday help or hinder Landlords and Tenants?
Landlords applying for a mortgage payment holiday are expected to pass the reduction on to their tenants, giving them breathing space from the rent while they get back on their feet. However, this is not a rent discount, so sensible forward planning needs to apply; if the tenant isn’t going to pay rent for 3 months, it could leave significant debt to be cleared over the rest of the year, making ongoing rent payments more expensive. For example, if a family home is rented at £1200pcm and a 3-month payment holiday is applied, there will be £3,600 in agreed arrears at the end of the payment holiday. Even if split over 12 months, this is an extra £300 a month on top of the rent. Furthermore, for 6-month tenancy agreements that may not be renewed, this may not be practical at all, because at the end of the tenancy a significant debt would remain.
There is of course the option to simply reduce the rent for the 3 months rather than pausing it completely. That would still make a significant positive impact on the tenants in tough times without the risk of running up debt or pushing affordability later down the line.
For the mortgage payer, the 3-month mortgage break doesn’t carry much risk of running up debt or pushing affordability, and the mortgage companies, of course, will ensure this doesn’t happen. The average increase in monthly repayments is expected to be about £12 after the holiday, which is certainly reassuring. However, interest will still accrue during any payment holidays making the mortgage slightly more expensive in the longer term and taking longer to clear it. The general advice is to only take the payment holiday if it’s really needed.
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