Autumn 2024 Budget: What it means for landlords

In the Autumn Budget 2024, the first female Government Chancellor, Rachel Reeves, raised a slight sigh of relief from UK private landlords and property investors for not altering the Capital Gains Tax (CGT) on buy-to-let properties and second homes. However, Stamp Duty (SDLT) on second properties has leapt from 2-5%, leaving a bad taste for investors and those looking to expand their property portfolios.

The positive angle to come out of the budget for existing and future landlords is that CGT for property investors remains the same and wasn’t changed to match income tax rates as feared in the weeks before the Autumn Statement.

Pre-budget chatter suggested an increase in CGT tax rates would include residential properties and perhaps prompt a potential mass exodus from the market. However, it was announced that CGT rates on residential properties, including buy-to-let and second homes, will remain at 18% for the lower rate and 24% for the higher rate – a move welcomed by landlords and property investors.

It, therefore, may now be more profitable for Landlords to keep their properties on the rental market rather than selling up, which was a key concern during the lead-up to these announcements.

In contrast, the change in Stamp Duty has been viewed more negatively as this could prompt potential investors already in the purchase pipeline to back out, adding more pressure on the private rented sector and further reducing tenant choice in the long term. Reeves confirmed an increase in the stamp duty surcharge from 3% to 5%, effective from 31st October, causing havoc for those pushing for completion on properties during budget week. The change is expected to impact landlord profits and may lead to many withdrawing from buy-to-let investments.

Meanwhile, both landlord groups and welfare charities have warned that further freezes on housing benefits could result in tenants falling behind on payments for their private rent, leaving tenants and landlords at risk. According to anti-poverty charity the Joseph Rowntree Foundation, private renters on housing benefits will be, on average, ‘£243 per year worse off following the freeze on payment amounts.’

Changes at Glance

• An increase in CGT tax rates, with the lower rate rising from 10% to 18% and the higher rate from 20% to 24%.
• CGT rates on residential properties, including buy-to-let and second homes, will remain at 18% for the lower rate and 24% for the higher rate.
• Private Residence Relief, which exempts main residences from capital gains tax, will continue unchanged.
• Stamp Duty (SDLT) increases from 2% to 5%.
• Budget freeze on housing benefits.

The Autumn 2024 Budget provides a mixed outlook for UK landlords and investors. With some initiatives, such as retaining CGT rates on residential properties and offering some stability, the sharp increase in the Stamp Duty surcharge has raised substantial concerns.

Whilst the retention of the CGT rates provides a level of relief, the Stamp Duty rate increase and housing benefit freeze presents new challenges, making it essential for landlords to carefully consider the long-term impacts on their portfolios and investment strategies.

References:
https://www.financialreporter.co.uk/budget-2024-government-increases-capital-gains-tax-rates.html
https://www.jrf.org.uk/housing/stop-the-freeze-permanently-re-link-housing-benefits-to-private-rents
https://www.propertyreporter.co.uk/budget-2024-government-increases-stamp-duty-for-second-home-to-5.html