Now that the dust has settled on the Budget, let’s explore what it could mean for landlords and buy-to-let investors across the UK. The central themes of the Budget, as outlined by Chancellor Rachel Reeves, focused on economic stability, investment, and boosting household finances, while also addressing a £40bn gap with new tax measures. However, there are some significant changes landlords should be aware of.
Stamp Duty Increase for Additional Properties
A major headline from the Budget was the increase in the higher rate of Stamp Duty Land Tax (SDLT) for additional properties in England. Effective immediately, the rate has been raised from 3% above the standard rate to 5% above. For example, while a first-time buyer purchasing a £250,000 property pays zero SDLT, a landlord will now pay £12,500.
It’s worth noting that Stamp Duty will increase again next year, as a temporary £125,000 threshold boost that currently starts at £250,000 (£425,000 for first-time buyers) is set to end in April 2025. This move is seen as a deterrent for buy-to-let investors, second home buyers, and holiday home owners.
What Does This Mean for Landlords?
While this change isn’t ideal for landlords looking to expand their portfolios, there are still positive aspects to consider. Strong rental yields and stable property prices in many areas may help buy-to-let investors offset this tax increase with careful purchasing. Additionally, there are competitively priced properties available in the market, providing opportunities for savvy buyers.
Capital Gains Tax Unchanged for Residential Property
Landlords, along with owners of second and holiday homes, may be relieved that Capital Gains Tax (CGT) rates for residential property remain unchanged. The recent Budget confirmed that the steep increases in CGT for other asset types do not affect residential property, which remains at the same rates (18% for the basic rate and 28% for the higher rate).
This could be seen as a positive, as it maintains residential property on par with other investment types. However, it raises questions for landlords: Is it better to hold on to rental properties or consider selling now before any future increases? Consulting with a trusted estate agent can help clarify your options, whether you’re considering selling or maximising rental income.
Inheritance Tax (IHT) Unchanged – For Now
Despite speculation, the Budget left the Inheritance Tax system largely unchanged for residential property, with the IHT threshold remaining at £325,000 for at least two more years. While this may change in the future, it offers a window for landlords to consider estate planning and consult a financial adviser to ensure their assets are protected.
A Glance at Other Key Budget Elements
Overall, the Budget was not as severe for landlords as anticipated. The expected steep increases to CGT and IHT on residential property did not materialise, and there were no changes to Income Tax, VAT, or National Insurance. Council Tax rates also remained stable, avoiding further financial pressure.
Additional measures, such as an above-inflation increase in the minimum wage and a freeze on fuel duty, could indirectly support tenants by reducing cost-of-living pressures. This stability may benefit landlords by reducing tenant turnover and payment issues.
Final Thoughts on the Budget and Lettings Market
While the Budget brought some significant changes, it did not deliver as drastic an impact on the lettings market as some feared. This may present an opportunity to approach the coming months with cautious optimism and strategic planning.
For tailored advice on letting or managing your property in light of the Budget changes, get in touch with our expert lettings team today.
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