“Budget for Growth” cut its forecast for growth in 2011 down from 2.1pc to 1.7pc. Prediction for 2012 to 2014 remains between 2.5 and 3pc each year. Budget for Growth? what’s behind Chancellor’s headline grabbing title?

Don’t rush to conclusions before you read the other two related headline numbers.

  • Borrowings in 2011 will be £146bn – £3bn below target, £122bn next year, and finally £29bn by 2015-16.
  • National debt is forecasted to be at 60% of national income this year, 71% in 2012 and finally 69% by 2015.

In summary, hold-on tight until 2015, but how will be the journey? are we going to have an easy ride or a bumpy one… read on…

Some of the key areas of impact are as follows:

Investors and Businesses:

  1. Corporation Tax will fall from 28% to 26% from April 2011. The rate will then be reduced by a further 1% in each of the following three years and will reach 23% by 2014 – it now makes more sense to declare true profits.
  2. Reduction in fuel duty has the potential to curb the rising business operational costs – good news and will help everyone.
  3. Private jet users to pay passenger duty for first time – well you can afford it anyway.
  4. Levy of up to £50,000 on ‘non-doms’ resident in the UK for 12 years – you guys have really got off the hook here, but hey we need you to continue investing here.
  5. Tax avoidance clampdown to raise £1bn this year – the message cannot be simpler!
  6. Plans to switch air passenger duty from passengers to planes have been dropped – this will help not only businesses that have staff jetting across the world but also the lucky ones who manage to still squeeze out their annual international vacation. 


  1. Most families with income earners will have to chip in a bit to fund the state costs – it is estimated that the recent announcements could cost families almost £ 30 Billion.
  2. The 1p reduction in fuel duty rather than a 4p increase - sigh of relief for most families who see their fuel bills climb every time they fill in their tanks.
  3. The forecast for unemployment has been increased for the period 2012 to 2015 -  watch out, not the time to be complacent. If you are in public sector, sorry too late to even buy your redundancy cover as most insurers do not offer it anymore to public sector employees, save what you can and jump the sinking ship as fast as you can.
  4. If you are under 25 and looking for apprenticeship – well you may find your break soon as the Budget announced 100,000 additional work experience placements over the next two years – no more excuses or blaming the state.
  5. If you are a pensioner and depend on state pension, watch out, you could miss out on almost £700 of income from the state pension – sorry you should have saved a bit more.
  6. Just hope that you are not amongst the 40,000 who might have to pay National Insurance – Bad luck if you are, not a lot you can do anyway.
  7. If you are at the bottom end of the ladder or an entrepreneur and can choose to be flexible with what you draw (declare!) as a salary  - good news as the annual personal allowance will rise to £8,105.
  8. Thresholds for various direct taxes would be linked to the consumer price index from April 2012. So what does this really mean?  The Government expects t o save £ 1.5bn by making this switch – benefits and pensions will increase more slowly while more of our income is eaten away by taxes.  
  9. The Treasury insisted the change did not affect income tax thresholds. Officials estimate that it will rake in almost £2bn in extra National Insurance by April 2016 – Clever!
  10. In the 2015-16 year the total savings is expected to be £10.6bn bringing total savings over the five years to an astonishing £27.6bn – Really?
  11. No additional changes to alcohol duty rates. Tobacco duty rates up by 2% above inflation, duty regime to be reformed – rolling tobacco targeted – sorry guys (who roll tobacco), you will not be ignored.
  12. Government-backed shared equity scheme to help 10,000 first-time buyers to purchase properties – well, finally your dream to get onto the housing ladder might well come true…
  13.  Gift Aid benefits limits to increase to £2,500 (from its current £ 500). No form filling for small donations – this will benefit charities by £240m – laudible, last thing you want is block people who are chartiatble with unnecessary forms.
  14. From 6 April 2012, there will be a reduced rate of inheritance tax of 36 per cent for estates leaving 10% or more to
    charity - The Big Society rewards you if you help the needy!

Finally, if you are a landlord … what does Budget 2011 mean to you?

Your tenants will continue to be tenants for the foreseeable future. Good news – probably but remember, you cannot continue to increase your rents just because there is more than one offer to rent your property, affordability is on the decline – so in the current climate, if a tenant offers to pay a rent that is too good to be true – it probably is.

I would always say this, albeit at the risk of boring you. Do not be pennywise… Best Rent Guarantee costs less than £ 120 for 12 months. Less than 30p per day can assure you a good sleep, cause if your tenant fails and you have taken our rent guarantee, WE will be worrying about the rent and collections if the tenant defaults.

Lastly, we cannot afford to beat Directline with those expensive TV advertisements on landlords buildings and contents insurance, but we can definitely beat them on pricing. We promise you a price beat guarantee, so please shout for us – we will be grateful to you and also offer you a £ 25 M & S cash voucher completely free if you.


The latest reports from the Office for National Statistics (ONS) shows that Consumer Price Index rose (CPI) to 4.4% in February. This is not only a 28 month high but also higher than the 4.2% that was being forecasted by the various analysts and economists. The more worrying figure is actually the Retail Price Index (RPI) which rose to 5.5% and is currently at its highest level for 20 years!

Swap rates always have a story to tell in terms of the future interest rates. One-year swaps surged from 1.27% to 1.34% while five-year swaps were up from 2.79% to 2.90%.

Average diesel prices crossed the 140p mark and average cost of petrol is now about 134p. Brent crude at its two-year highs of $120 due to the unrest in Libya and other oil producing countries in North Africa and the Middle East.  The price of commodities such as wheat and cotton has also increased dramatically in the past twelve months due to the growing demand from emerging markets. And to compound these issues, weakness of British Pound in the foreign exchange markets makes the good more expensive. Some analysts would also argue that the VAT increase has had a profound and long term impact on the inflation rises.

The only silver lining could be the confidence of Mervyn King, the Bank of England’s Governor who insists that the inflation will rise upto 5% in the short term before rapidly falling back to its target of 2% in about two years’ time. This puts doubts in minds of people yet again as to whether the Bank of England will put its rates up next month or will it wait for a few more months say until end of the year before putting the rates up. Stagnant incomes, rising inflation and stringent lending by the banks is just making the situation of UK households worse by the day.

So what does this really mean for landlords?

The fact that first time buyers are not finding it any easier to get their mortgages approved and the combination of low stock of new builds coming to the market means that rental demand is here to stay for the longer term. However landlords should not assume that more tenants means that rents will go up. Rising inflation and stagnant wages limits the affordability of tenants and there is a growing tendency amongst tenants to compromise on their requirements rather than pay more to get their ideal home. In my view, landlords should also be wary of the fact that inflation adds to unemployment and there is an increased risk of tenants losing jobs. Hence, whether landlords like it or not, rent guarantee insurance is almost a necessity, the last thing any landlord wants is miss their rents and the aggravation of delays and defaults.

So in effect for landlords, while inflation might indirectly help with a rise in demand for rental properties, it may not translate into higher rents.


Latest research figures published by LSL property services indicate that the rents have risen for the first time in 2011 going up by 0.2% leading to an annual increase of about 3.9%.

It is interesting to note that the average yield from buy to let investments increased to five per cent in February 2011, as the rent increased at a faster pace than rental property values during the month.

London continues to lead the pack and average rentals across London has gone up by 7.7 per cent in the last 12 months. This is almost twice the national average and the increase has surprised many analysts given the tight market that exists in London.

There are several factors that are contributing to such a consistent and steady growth of buy to let investment returns. The first time buyer market is far from recovery. Tight lending criteria, low LTVs and uncertainty in the job markets being some of the major factors. Many potential renters who ended up staying with parents or sharing accommodation are coming to terms with reality and now settling down as tenants for the medium term. Shortage of social housing is also continuing to fuel the demand. Until the lending market eases up a bit or employment situation improves, there will be steady growth in the buy to let market in the medium term.

While the news is overall very positive for buy to let landlords, the story is not that rosy in some areas. I have seen landlords who have large portfolio i.e. more than 40-50 properties but struggle to meet their mortgage payments on time. There are also smaller landlords who are struggling to let their properties. Keeping things simple, it boils down to two basic things aspects – location of the properties and whether the tenants are paying rents on time.

Latest figures show that landlords suffered setbacks in the shape of increased tenant arrears, with 12.6% of all UK rent unpaid or late by the end of February – an increase from 11% the previous month. Unpaid rent totalled £296m across the UK in February, up from £258m in January. Increasing rental arrears is a real risk for landlords. With increased public sector job losses and the continuing spate of redundancies in the private sector, landlords have to be very cautious on who they choose to let to. It is common practice now for landlords to reference their tenants and buy a good rent guarantee. However, some landlords I have come across, treat such risk management tools as unnecessary as they have never had a bad experience. There are in-numerable instances and examples and past is never a basis for predicting the future and hence my view is that landlords should increasingly adopt a belt and braces approach rather than just depending on their gut feeling and intuition.

Nevertheless, as the old adage in property goes – brick and mortar never fails… let us hope that the rental returns sustain at current levels. With some careful risk management, one can safely say that landlords are in for a good year in 2011.