December, 2024
Ahead of October’s Budget, landlords were nervous that they would be stung by a hike in Capital Gains Tax when selling a rental property after rumours that the tax would be increased. The threat posed added pressure to landlords already facing increased costs as well as upcoming changes in responsibilities once the Renters’ Rights Bill comes into force.
They were relieved therefore that although Chancellor Rachel Reeves did announce Capital Gains Tax rises, they didn’t apply to property. Instead, rates were increased on stocks and shares gains, bringing them in line with the existing rates payable on property.
This could mean that landlords reconsider property investments. However, they will be weighing up the impact of an unexpected Budget announcement – the immediate rise in Stamp Duty Land Tax (SDLT) for buy-to-let investments.
It could be argued that the SDLT increase won’t have too much impact on the longer-termpurchase of a property investment since the gains from rent and the rising value of the property itself should outweigh the increased stamp duty that will be due.
However, it does increase immediate costs for landlords who have already faced rises in everything from maintenance to mortgage prices. It means that careful budgeting will be essential to ensure the figures add up in the short term.
The additional financial strain, as well as increased responsibilities in the Renters’ Rights Bill, has already led some landlords to leave the market. More may well follow. This will be bad news for tenants since it will mean that rental prices are likely to increase further as the shortage of rental properties in the market continues. Organisations such as the NRLA and RICS have already warned of such consequences.
There were attempts to address this shortage of rental properties by Reeves, who announced increased investment in additional housing that will help expand supply longer-term. A new housing package included £500 million in new funding for the Affordable Home Programme to build up to 5,000 additional affordable homes. It increased the annual budget to £3.1 billion and the total investment in housing supply to over £5 billion.
There was also the announcement of £3 billion in additional support to SMEs and the Build to Rent sector by expanding existing housing guarantee schemes to support the housing market. Planning changes also aim to unlock blocked housing supply and relieve pressure.
Reeves also outlined increases to the National Living Wage which will put more money in the hands of lower-paid consumers and help with affordability. The government says this is essentially a pay boost for 3 million workers.
This was coupled with cuts in duty on draught pints and no increases in the main rates of income tax and employee national insurance and followed by a November cut in the base rate by the Bank of England. However, if rents do rise then this extra cash could quickly be swallowed up so those rent payments may still be under pressure.
