- Insights
TBA’s latest news – 6th of November 2023
Bank of England Officially Confirms No Interest Rate Hike
As of September 2023, the Bank of England has raised the base interest rate 14 consecutive times to curb soaring inflation. Last Thursday, the Bank of England officially announced a pause in raising the base interest rate, marking the second pause of its kind this year.
Currently, the UK’s base interest rate will remain unchanged at 5.25%—the highest level in 15 years.
Bank of England Governor Andrew Bailey acknowledged that the cost of borrowing in the UK is expected to remain high, and that it is too early to consider a rate cut.
The Bank of England predicts that with the ongoing moderation in energy and food price increases, UK inflation will continue to decline over the next few months. According to forecasts, the inflation rate for the full year in 2024 will remain around 3%, higher than the 2% target. Therefore, the central bank expects interest rates to remain at elevated levels, at least until 2025.
Investors Cannot Hold Fractional Shares in ISAs
In recent years, a new investment trend has emerged in the UK: fractional shares, which refer to portions of company stocks and exchange-traded funds smaller than whole shares. Fractional shares often attract investors who don’t have enough funds to purchase whole shares of companies. They offer the same benefits as whole shares, such as the right to receive dividends on a proportional basis.
With the popularity of this investment method in the UK in recent years, many financial companies seized the opportunity to create trading apps like Freetrade, Trading212, investEngine, and EToro, allowing investors to hold fractional shares in Individual Savings Accounts (ISAs). Investors can buy expensive US stocks like Apple, Amazon, and Tesla for as little as £1, making it cheaper to build a portfolio of their favourite companies compared to traditional DIY investment platforms.
UK House Prices Show Monthly Increase
This week, Nationwide, the UK mortgage lender officially released its October House Price Index. The report indicates that UK house prices have experienced the largest monthly increase, with a 0.9% rise in house prices for the month. Nationwide’s analysis concluded that a shortage of properties in the market is not meeting the demand, driving the monthly price increase.
Although house prices have risen slightly, the market remains relatively subdued compared to the same period last year, with average prices significantly lower than the previous year. Data shows that the average house price in October decreased from £268,282 to £259,423, a year-on-year decrease of 3.3%.
However, UK house prices remain higher than they were before the pandemic, with the average price for UK properties in October 2019 at £215,368.
UK Landlords’ Annual Income £48.8 Billion
The latest income data for Buy-To-Let landlords from HM Revenue & Customs in the UK is now available.
The data indicates that for the tax year 2021/2022, non-corporate landlords reported a total property income of £48.8 billion, an increase from the previous year’s £46.3 billion.
HM Revenue & Customs reports that in the tax year 2021-2022, a total of 2.79 million landlords submitted self-assessment tax returns, with the majority operating as individual Buy-To-Let landlords. Additionally, there were 300,000 partnerships owning rental properties, with a combined income of £6.17 billion.
Over the five-year period from 2017 to 2022, the total property income in the UK increased by 10%, with an additional 100,000 landlords and average income rising to £16,700.
Every year, landlords apply for tax relief from HM Revenue & Customs to reduce their tax obligations. The data shows that the most significant category of expenditure for landlords is business expenses. For the tax year 2021-2022, landlords collectively applied for £6.85 billion in tax relief for business expenses. Among the most common business expenses claimed are rent, insurance, maintenance, and repair costs. Approximately 67% of landlords reported these types of expenses, with a total claims increase of 6%.
The bonus cap for investment banking personnel will be lifted
To curb risky behaviour in the financial services industry after the 2008 financial crisis, the UK government introduced new measures in 2013. These rules imposed limits on the additional bonuses that UK investment bankers, including employees of banks, housing associations, and other financial firms, could receive. The maximum limit was set at twice their basic salary.
According to reports from various UK media outlets, last year, former Chancellor Kwasi Kwarteng announced plans to remove the bonus cap for UK investment banks. This move aimed to make London a more attractive place for conducting business.
Subsequently, after the new Chancellor took office, the UK government collaborated with regulatory bodies, including the Prudential Regulation Authority and the Financial Conduct Authority, to conduct a four-month consultation on whether the policy should be retained or if the bonus cap for investment banks should be lifted.
