At the end of October, Chancellor Rachel Reeves delivered the first budget under the Labour government in 14 years. The rental market had come to a complete standstill, and landlords were very fearful.
However, since the post-autumn statement, there hasn’t been the type of fallout that had been expected. In fact, there has been a slight positive movement in the property market, with an uptake in the number of people who are moving.
In one of the more positive moves announced for landlords following the Budget, Labour revealed that it would be holding capital gains tax (CGT) at the existing rates. Landlords are required to pay CGT when they make a profit on a property that is not the residential property that they are selling.
As there was a fear that this tax would be increased as a way for the government to try and plug a hole that was reported to be worth £22 billion, this had led to many looking to move on their rental properties. It also coincided with the fact that letting agents had found there wasn’t a rental market at the time, with no tenants looking to move in during this period of time.
Nonetheless, the decision to lock CGT tax rates for landlords appears to have calmed any concern. It has even fuelled growth, as there is no longer an immediate rush to sell. At the same time, there has been an automatic uptake in the number of potential tenants. Still, figures suggest we could be in a selling market, as 29% of landlords are preparing to sell their property in the next year, while just 11% are planning to buy in the same 12 months.
The rates for those who still decide to try and sell a buy-to-let property that they own remain at the following:
The Budget also confirmed that the inheritance tax threshold will be frozen. It will remain at £325,000 until 2030, meaning this amount of an estate can be inherited without taxes being paid. This can be raised to £500,000 if the estate is passed to direct descendants.
Those who inherit from a surviving spouse or civil partner will be eligible for up to £1 million tax-free. This allows landlords to potentially keep and expand their portfolios of rental properties without the burden of paying more tax.
These benefits should keep good landlords in the property market for the foreseeable future, while they may attract new potential landlords, thus creating new homes for the nation’s people.
Labour’s Budget isn’t all good news for landlords. In fact, it’s been described in some sections as “a mixed bag” at best.
Many are concerned about the increase in stamp duty and the end of the inheritance tax freeze (ending in 2028 and rising at the inflation rate thereafter). Stamp duty that landlords will need to pay on additional properties will be increased from 3% to 5% for a property valued up to £250,000. Higher stamp duties will be required for properties greater in value. For example, a property with a value of between £250,001 and £925,000 will see its stamp duty increase from 8% to 10%.
In 2022, the minimum stamp duty rate increased from £125,000 to £250,000. This will end in March 2025 and return to its previous rate, with the government yet to confirm if there will be any extension in the future. As a result, landlords who decide to purchase new rental properties to grow their portfolios will encounter significant increases in the amount of tax that they will pay.
