2024 spring budget: 7 key points for landlords - Total Landlord Insurance

March 21, 2024
2024 spring budget: 7 key points for landlords - Total Landlord Insurance

At the beginning of March, Chancellor Jeremy Hunt gave his spring budget, laying out the economic forecast for the UK as a whole and announcing various policy changes that the Government intends to implement.

While that included some tax cuts and the raising of both VAT and child benefit thresholds, there were also cuts to tax relief for property investors. However, the really good news is that the general forecast for the economy was positive, especially regarding inflation, base rates and potential falls in mortgage rates.

Here are the top seven things for landlords to know about from the latest budget, to help you plan for the future:

 

1. Inflation is set to return to two per cent target by the summer

This is good news for the property market. Last year, experts were forecasting that inflation would drop to around 3.6% in 2024, with Capital Economics giving the most optimistic prediction at 2.4%. However, the Chancellor announced that inflation is now forecast to fall below its target of two per cent by the end of June – and by another half percent next year.

This drop back to the long-term average rate of inflation should enable the Bank of England to start reducing the Bank Rate (also known as the base rate) from its current 5.25%. If  this happens, mortgage lenders are usually quick to follow suit, which will be great for borrowers – especially those that have or are coming off low fixed rates over the last 24 months and are worried about higher repayments.

The CBRE expects average mortgage rates for five-year fixed products to fall to around 3.8% by the end of the year – that’s down from 4.86% in Q4 2023 – and to continue falling over the next five years.

 

2. Capital Gains Tax has been reduced for higher-rate tax payers

In an unexpected move, the Chancellor announced a drop in the higher rate of CGT, which will come into effect for the new tax year.

If you’re a higher or additional rate tax payer, CGT is currently charged at 28% but this will drop to 24% from 6 April 2024.

This is a welcome change and should help those paying tax at the higher rate offset the reduction in the personal tax-free allowance. As a simplified example, if you had a £100,000 net gain:

Selling in the 2023/24 tax year, with a personal allowance of £6,000 and a CGT rate of 28%:

£94,000 x 28% = a CGT bill of £26,320

Selling in the 2024/25 tax year, with a personal allowance of £3,000 if the CGT rate were still 28%:

£97,000 x 28% = a CGT bill of £27,160

Now, selling in the 2024/25 tax year with the reduction in CGT:

£97,000 x 24% = a CGT bill of £23,280

 

So, even with the £3,000 cut in the personal allowance for 2024/25, the four per cent reduction in CGT means you pay less tax than you would have in this year.

For information on all the taxes landlords pay, and the relief and allowances you may be able to claim, see our complete guide for 2024/25.

 

3. Multiple dwellings relief is being abolished

As it currently stands, if you buy more than one property at a time – either in the same transaction or linked transactions – you can claim relief on Stamp Duty Land Tax.

This relief essentially averages out the price per dwelling, which can allow you to reduce the tax liability on the more expensive properties in the transaction.

For example:

  • You’re buying two flats, one at £200,000 and one at £300,000. Normally, £50,000 of the more expensive property would be liable to SDLT at five per cent
  • However, the average price per property in the transaction is £250,000, which is below the threshold, therefore no standard residential rate purchase tax is due, saving you £2,500
  • Note that you are still liable for the additional rate of three per cent, which is applied to the whole transaction value

However, this is being removed for transactions that complete from 1 June 2024, although it will still apply after that date, as long as contracts were exchanged on or before 6 March 2024.

 

4. Holiday let relief is being scrapped

If you have a property that you operate as a holiday let, you can currently claim holiday let relief, which includes:

  • Being able to deduct the full cost of mortgage interest and other financial costs from rental income
  • Paying CGT at a reduced rate of 10%  when the property is sold, as long as you qualify for Business Asset Disposal Relief

As announced in the spring budget, this relief will be scrapped from 6 April 2025, unless the properties are held in a limited company, in which case they can continue to deduct the finance costs.

As such, landlords who currently let their properties as short-term holiday rentals should reassess their investment to make sure it will still stack up financially when the relief is removed. Find out more about our short term let and Airbnb insurance.

 

5. The rate for Class 4 National Insurance contributions is dropping

Further to the announcement in last November’s autumn budget that Class 4 contributions would be reduced from nine per cent to eight per cent, the Chancellor has now announced a further two per cent drop.

That means, for the 2024/25 tax year, self-employed landlords with profits of between £12,570 and £50,270 will pay Class 4 National Insurance at six per cent.

National Insurance can be quite a complex issue, so it’s best to speak to a tax professional to check your obligations.

 

6. Thresholds for paying VAT and receiving child benefit have been raised

Although these two changes won’t apply to every landlord, they should benefit many:

  1. The threshold for registering a UK business for VAT has been increased from £85,000 a year to £90,000 from 1 April – the first increase in seven years. According to the Treasury, this will mean 28,000 small businesses will no longer need to pay the tax.
  1. Currently, those with children that have total household earnings of more than £50,000 start to lose child benefit. This threshold will go up to £60,000 from 6 April 2024.

 

7. Investment will be made in specific local areas

Despite the ongoing significant shortage of properties for both purchase and rent, there were no significant announcements in the budget to help increase the supply of new homes across the UK. 

However, Jeremy Hunt did outline specific areas that will be receiving additional funding, and that should support and encourage the building of new homes in those locations. Some of the areas mentioned include:

  • Barking Riverside and Canary Wharf: £242m of investment has been pledged, to help build around 8,000 houses and develop Canary Wharf into a tech hub for life science companies
  • Cambridge: The Government announced last year that it intended to make the city ‘Europe’s Silicon Valley’ and a leading centre for medical research and health science. This budget confirmed that long-term funding would be made available at the next spending review, with the aim of building 250,000 new homes

For landlords investing in these areas, it’s well worth looking at local council plans to find out exactly where infrastructure and business investment is going to be made. Regeneration of an area can lead to an increase in demand for housing and a rise in both prices and rents, so there may be some good buy to let opportunities. Read our ultimate guide to buy to let property investment for more advice on the factors to consider.

Summary of tax changes for the 2024/25 tax year

These are the five changes taking effect for the coming tax year, which runs from 6 April 2024 to 5 April 2025, which may be relevant for your tax return:

  • Higher-rate CGT dropping to 24%
  • Rate of Class 4 National Insurance contributions dropping to six per cent
  • Child benefit threshold increasing from £50,000 to £60,000
  • VAT registration threshold raised to £90,000 (from 1 April)
  • Multiple dwellings relief being scrapped from 1 June

Subscribe to LandlordZONE, also powered by Total Property, for more analysis of how the budget will impact landlords and other private rented sector news.

For the latest advice on UK landlord tax, see our complete tax guide for 2024/25.

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