13:47 PM, 30th October 2024, About 23 hours ago 28
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In a move that could severely damage the private rented sector (PRS), the Chancellor Rachel Reeves announced in the Budget that the stamp duty surcharge on additional homes will increase to 5% from tomorrow.
The rise from 3% will hit landlord profits – and likely undermine desperately needed landlord investment in the PRS – and lead to fewer homes for rent.
ARLA Propertymark president, Angharad Truman, said: “We continue to see a growing disparity in the number of private rented homes available against a backdrop of increasing demand from tenants.
“Therefore, it is disappointing to see that the UK Government did not address this fundamental issue in its Autumn Budget and instead has announced yet another blow for landlords by increasing Stamp Duty on second homes.”
However, fears that landlords selling rented homes would have to pay a much higher rate of Capital Gains Tax (CGT) have failed to materialise in Ms Reeves’ first Budget as Chancellor.
Critics had feared that the higher rate of CGT would rise to 40% – up from 24% currently.
However, Ms Reeves announced that the lower rate of CGT will rise from 10% to 18%, and the higher rate from 20% to 24%.
But in some good news for landlords, the rates on residential property will remain at 18% and 24%.
Also, Capital Gains Tax rates on carried interest will rise to 32% from April 2025.
The Budget aims to raise taxes by £40bn and Ms Reeves also revealed that the inheritance tax threshold will be frozen by another two years to 2030.
That means the first £325,000 of an estate can be inherited tax-free – which rises to £500,000 if the estate includes a residence passed to direct descendants.
The move will also see that figure increasing to £1m when a tax-free allowance is passed to a surviving spouse or civil partner.
From April 2026, the first £1m of combined business and agricultural assets will continue to attract no inheritance tax.
For assets of more than £1m, inheritance tax will apply with 50% relief, at an effective rate of 20%.
The Chancellor confirmed a hike in employers’ national insurance from 13.8% to 15% – a ‘decision not taken lightly’.
However, the threshold has fallen to £5,000 – from £9,100.
That will hurt a lot of smaller business, critics warn, though Ms Reeves says the move will raise £25bn.
National Insurance, VAT and income tax ‘for working people’ have not been increased.
Other highlights from the Autumn Budget include:
GlanACC
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Sign Up7:39 AM, 31st October 2024, About 5 hours ago
I love all this cobblers about 'the rents will have to rise' , whenever the conditions change - selective licencing costs, S24, CGT etc etc. Well what landlords (including me) have to realise is that there is simply a limit as to what tenants can pay. Yes, you might be able to increase the rent by 10 or 20 a month but in circumstances today increased of 100s of pounds which some landlords are expecting is just not on. All that will happen is tenants will stop paying the rent and you will be stuck with them for a year while you try to get them out. Many of the issues were caused by S24 by overextended landlords. Luckily I managed to sell 12 properties to pay off the other 6 so I am now mortgage free.
When my tenants leave I will sell the property, and I would urge landlords to examine their finances and take a realistic view - if you cant make it pay , make it go away .. and sell
We have been well and truly shafted by the Conservatives with Labour hammering the final nail into the coffin.
Jason
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Sign Up7:42 AM, 31st October 2024, About 5 hours ago
Also buried on page 87 and not mentioned is that the 0% upto £250k will go back to 2% from £125k from April 2025.
https://assets.publishing.service.gov.uk/media/6721d2c54da1c0d41942a8d2/Policy_Costing_Document_-_Autumn_Budget_2024.pdf
Dylan Morris
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Sign Up8:44 AM, 31st October 2024, About 4 hours ago
I sold one of my rental flats earlier this year for £120k to another landlord as I wanted my excellent long term tenants to stay in situ. Stamp duty was £3,600 and the buyer was balking at handing such an amount over to the Chancellor. I got the place sold by the skin of my teeth. There’s no way the buyer would have been willing to pay SDLT of £6,000. So landlords exiting are going to have an even more difficult time selling to another landlord now. Which means kicking tenant out and selling with vacant possession. Well done Labour.
They’ve also crippled business with huge increases to NIS and Minimum Wage. Result = job losses. Well done again Labour.
Jason
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Sign Up9:01 AM, 31st October 2024, About 3 hours ago
Reply to the comment left by Dylan Morris at 31/10/2024 - 08:44
Agreed or if the extra stamp duty is factored in then than can only mean rent rates will increase to maintain a sensible ROI.
JamesB
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Sign Up9:51 AM, 31st October 2024, About 2 hours ago
Reply to the comment left by SimonP at 31/10/2024 - 04:00"SDLT is not a charge against income, therefore LL's profits will not be affected. It is considered to be a cost of acquiring property amd therefore can generally only be deducted when calculating capital gains (or losses) for CGT purposes."
That is like Labour party maths! A bit like "we aren't taking anything more from employees" (only the pot that pays them).
One question Simon: How do people finance this extra charge? Answer: - With borrowings that incur a regular interest charge. (A P&L line)
Even if you are an entirely cash landlord as I am, you would still have opportunity cost foregone to factor in, ie the income I would have foregone on my other investments I would have had to pull money from.
You can't just take more in taxes and think that it doesn't affect anything.
JamesB
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Sign Up9:57 AM, 31st October 2024, About 2 hours ago
Reply to the comment left by SimonP at 31/10/2024 - 04:00"SDLT is not a charge against income, therefore LL's profits will not be affected. It is considered to be a cost of acquiring property amd therefore can generally only be deducted when calculating capital gains (or losses) for CGT purposes."
Simon are you a landlord? If so, I am surprised and you really need to think this one through more carefully. I''ll help. Where does the money come from to pay the extra 2%?
Answer, from borrowings which incur annual interest, or from other investments which should have been earning income, so, either way it will be a real p&l hit.
Dylan Morris
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Sign Up10:12 AM, 31st October 2024, About 2 hours ago
It’s not just landlords affected but developers too. Looking to buy a run down property that nobody else wants to buy as way too much work, to do a full refurb and sell on. That’s an extra 2% please. (Of course it could also be a landlord doing this bringing derelict properties to the rent market).
GlanACC
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Sign Up11:33 AM, 31st October 2024, About 44 minutes ago
Just been on the radio that people are pulling out of property sales / buys already due to the extra 2% - will only affect people who have an overlap between selling and buying their next property, but would seem that this is quite common.