Spring Budget 2024: How will it effect Landlords?
As anticipated, this year’s spring budget brought its share of announced “tax breaks,” albeit predictably accompanied by corresponding charges elsewhere in the industry.
Amidst the reduction in national insurance, alterations to non-dom status, and various other highlights, several points emerged with potential impacts on second homeowners, encompassing both positive and negative ramifications.
Holiday Letting Changes
For some time now there has been mounting political pressure to amend the tax arrangements on holiday lettings, particularly in areas like Cornwall and Wales where second properties are used for this purpose, arguably limiting availability for long term homes in the private sector. The chancellor has seen this as an opportunity to change the tax rules in this industry to fund other cuts elsewhere. They have done this by abolishing what was the Furnished Holiday Letting Tax Regime, introduced in 2020. Details below:
By closing this loophole the theory is that this narrows the gap of tax benefit between holiday letting and residential letting. Given that rents are performing at such a high level currently,, combined with the inconvenience of frequent turnover with holiday letting, this could mean that more second homeowners are inclined to let on a long term basis, in turn pumping more supply into the sector.
The word of caution on this point is that it has been combined with another tax change.
Capital Gains Tax
In the Budget the Chancellor announced that the higher rate of property Capital Gains Tax will reduce from 28% to 24%.
Capital Gains Tax applies to properties when a person makes a profit on selling a property that is not their main home. Examples include when selling buy-to-let properties, business premises, land, and inherited properties.
A notable adjustment unveiled in the Budget is the reduction of the higher rate of property Capital Gains Tax from 28% to 24%. This tax revision, applicable when individuals profit from property sales not tied to their primary residence, encompasses a range of scenarios, including the sale of buy-to-let properties and inherited estates. The lowered rate presents an opportune moment for second home owners to optimise their assets and potentially reconfigure their investment portfolios. This change could stimulate increased property transactions as landlords seek to capitalise on the favorable tax conditions
Both measures hold the potential to energise property markets, yet they also pose risks of exacerbating supply constraints in the rental sector if more landlords opt to divest their properties. Such a scenario could lead to heightened rental prices, benefiting property owners while burdening tenants with increased living costs. Source : https://www.gov.uk/government/topical-events/spring-budget-2024
In summary, the Spring Budget of 2024 introduces a nuanced landscape for landlords, marked by strategic tax adjustments that demand careful consideration. As landlords navigate these changes, they must weigh the potential opportunities against the accompanying risks to make informed decisions regarding their property investments.
For additional assistance or clarification on any of these changes, our lettings manager, James stands ready to guide you. Feel free to reach out at: [email protected] or 01905 675999.