Autumn Budget 2024: Landlords and renters hit by tax rise
Labour’s Autumn Budget has introduced major tax changes which will impact landlords and renters across the UK.
Chancellor Rachel Reeves, as expected, announced an increase in Capital Gains Tax (CGT) on higher-rate tax payers from 20 to 24 per cent, and basic-rate tax payers from 10 to 18 per cent.
Yet, the nil rate band annual allowance remains at £3,000.
Director at My Home Move Conveyancing, Alistair Singer, noted that this tax hike will influence how property investors and landlords approach property sales, with some choosing to retain their properties to avoid higher Capital Gains Tax rates.
He said: “Many property investors will be disappointed about the tax increase on capital gains”.
He also predicted that landlords may pass these costs to renters through the increase of rent as they try to maintain their current profit margins.
This concern has echoed across the property sector, particularly given the existing pressures on current rental supply and demand.
Yet Paul Hardy, managing director at LSL Estate Agency Franchising, said: “On a positive note it’s a relief that household property has been spared incremental CGT, which on one level suggests that the Government does have some appreciation of the value of the Private Rented Sector and on another level, might persuade landlords not to exit.”
How will stamp duty affect rent?
However, he expressed concern on the increase in Stamp Duty on second homes, which has increased from three to five per cent, calling it a “sudden impact” for investors planning to expand their portfolios.
This will hit landlord profits and lead to a lack of rental homes.
Peter Stimson, head of product at MPowered Mortgages, said: “What they got was a whack with a hammer… The irony is that it’s not just landlords who will feel the pain.”
He warned that fewer landlords will be interested in expanding their buy-to-let portfolios due to these increased taxes, which may shrink rental property supply and drive rent up even more.
This could worsen the housing crisis, especially as around a third of our population relies on renting.
Good news for first-time buyers?
Matt Thompson, head of sales at Chestertons, said: “The majority of first-time buyers will label the Budget a missed opportunity as there was hope that the Chancellor would retain the £425,000 Stamp Duty threshold for first-time buyers.”
Tony Leonard from eConveyancer said he sees a potential benefit for new buyers from these tax rates discouraging landlords from expanding.
He said: “The Chancellor has faced a fine balancing act in this budget, with economic confidence at the forefront. In the housing sector, this means nurturing demand while ensuring the available supply is proportionate.”
“This may be further supported as the government pushes forward with plans for 1.5 million new homes”.
“However”, he said, ” any shocks to debt markets, inflation or interest rates must be handled carefully in the coming days and weeks. A misstep now could undermine buyer confidence and destabilize the market. Changes to inheritance tax may also be a factor, given that intergenerational wealth transfers support many people getting on the property ladder.”