Autumn Budget 2024 – a summary for property landlords
Welcome to our monthly newsletter for property landlords. We hope you find this informative and please contact us to discuss any matters further.
The Autumn Budget took place on 30 October 2024. This was Rachel Reeves’ first budget as Chancellor and it intended to restore stability to our economy and to begin a decade of national renewal. Investment will be funded by revised debt rules to facilitate additional borrowing and a hefty £40 billion of tax rises. No changes were announced to income tax, so the taxation of rental profits will not change in 2025/26. The following measures will be of relevance to property landlords:
Capital Gains Tax
Whilst no changes were announced to the capital gains tax (CGT) rates on residential property gains, there will be increases to the rate of CGT applicable to other gains, such as disposals of commercial property or shares. For disposals made on or after 30 October 2024, the rate of CGT on gains falling in the basic rate band increases to 18% (from 10%) and the rate on gains falling above the basic rate band increases to 24% (from 20%).
Furnished Holiday Lettings (FHLs)
The Chancellor confirmed that the FHLs regime will be abolished from April 2025, meaning an end to the beneficial tax treatment. Thereafter, profits from FHLs will be taxed in the same way as any other property rental business.
Stamp Duty Land Tax
It has been confirmed that the 0% thresholds for Stamp Duty Land Tax (SDLT) will be reduced from 1 April 2025 as follows:
Main threshold: £125,000 (down from £250,000)
First-time buyers’ threshold: £300,000 (down from £425,000)
For transactions with an effective date (generally the date of completion) on or after 31 October 2024, the higher rates of SDLT payable by purchasers of ‘additional dwellings’ (i.e. when they already own one dwelling), and by companies, increases from 3% to 5% above the standard residential rates. This measure is clearly targeted at buy-to-let landlords and those acquiring second homes.
The rate of SDLT payable by companies and non-natural persons (e.g. trusts) acquiring dwellings for more than £500,000 increases from 15% to 17% also from 31 October 2024.
SDLT applies to properties in England and Northern Ireland. Property purchasers in Scotland and Wales do not pay SDLT – Land and Buildings Transaction Tax (LBTT) applies in Scotland, and Land Transaction Tax (LTT) applies in Wales. No amendments to these transaction taxes have yet been announced.
Renters Rights Bill 2024 – an update
The second reading of the Renters Rights Bill 2024 took place in parliament on 9 October, with Deputy Prime Minister, Angela Rayner saying that she is “determined to get this Bill in to law as soon as possible”.
The Renters’ Rights Bill intends to:
- abolish assured shorthold tenancies, replacing them with periodic assured tenancies;
- abolish section 21 ‘no fault’ evictions;
- reform and expand the grounds for possession;
- limit rent increases to no more than once per year and place requirements on the service of notice;
- prohibit the practice of ‘rental bidding’;
- give tenants the right to request a pet;
- make it illegal for landlords to discriminate against tenants who receive benefits or who have children when letting their property;
- introduce a new ombudsman service for the private rented sector;
- create a new private rented sector database containing key information for landlords, tenants and local authorities;
- introduce a decent homes standard to the private rented sector and apply Awaab’s Law to the sector; and
- expand rent repayment orders, and strengthen local authorities’ enforcement powers.
The Public Bill Committee will scrutinise the bill and has asked to hear the views of those who have relevant expertise and experience or a special interest in the Bill.
The first sitting of the Committee took place on 22 October and is expected to conclude on 28 November, although it may conclude earlier. Respondents to the Call for Evidence are therefore advised to submit written evidence as soon as possible.
The Call for Evidence and the bill itself can be accessed here.
Labour’s plans to build more homes
In August, Labour announced plans for a ‘News Homes Accelerator’, the project that is intended to facilitate the election pledge to build 1.5 million new homes over the course of this parliament.
How they can do this? The manifesto outlined key areas of change that are intended to facilitate the house building, including planning reform, investment in ‘brown-’ and ‘grey-field’ sites and the reintroduction of mandatory housing targets. Will this be enough?
Planning reforms can only do so much. The government may make it easier for developers to build new homes, but it cannot mandate them to do so. Housing developers will only build homes if they can profit from them, which in turn depends on a number of factors such as inflation, consumer confidence and mortgage rates. With relatively few, larger housebuilders seen as monopolising the market, it could be that they are to blame for the lack of new homes. For instance, they could be deliberately stalling building progress out of fear that a wave of new homes would make house prices lower and therefore less profitable. Whether planning reform will make a dent in the 1.5 million target remains to be seen.
For in-depth consideration of the issues at play, read the article here.
Meanwhile, the government has recently announced £68 of funding for local authorities to prepare brownfield sites so that new homes can be built. Delivered through the Brownfield Land Release Fund, funding will go to 54 councils to cover the cost of decontamination, clearing disused buildings or improving infrastructure such as internet, water and power.
Scotland – high expectations for the housing market
The September 2024 Royal Institution of Chartered Surveyors (RICS) Residential Market Survey shows that expectations for the Scottish housing market are at their strongest since the start of 2022.
Overall, 33% of respondents expect house prices to rise over the next three months and 32% expect the number of sales to increase in the same period. 40% of respondents reported that house prices had risen over the last three months.
However, overall new buyer enquiries had reduced, albeit at a slower rate than in August. This shows that demand is more limited. The survey can be read here.