View all articles
The UK Government’s 2024 Spring budget was recently delivered by Chancellor Jeremy Hunt, introducing the country’s financial trajectory for the near future. This one was eloquently labelled as a long-term plan for sustainable financial growth and is likely to be the last financial statement before the next general election, which must take place before the end of January 2025.
With the cost-of-living crisis still very much ongoing, not to mention inflation and interest rates being fairly turbulent, landlords, investors, and those seeking a buy-to-let property, were understandably paying close attention.
This year’s budget introduced several immediate and planned changes – including tax cuts and access to grants and schemes – that will affect landlords and their investments greatly. This short guide summarises the key takeaways from the 2024 Spring Budget that landlords should know when it comes to their investment plans.
Changes to Holiday Lettings
Currently, there is tax relief that landlords can claim if they let out their property as a furnished holiday let (FHL), but this is set to be abolished from April 2025 onwards.
This regime allows owners of qualifying holiday rental properties to:
- Deduct mortgage interest payments and costs of fixtures and fittings from rental income on holiday lays
- Make tax-favourable pension contributions
- Access valuable capital gains tax (CGT) relief when selling the property
- Pay income tax at the regular rate instead of the higher rate
The government believes scrapping these FHL rules will increase the availability of long-term rentals for residents, a prominent talking point in the housing market today. Currently, landlords operating holiday homes should review their financial models and consider potential restructuring ahead of April 2025, particularly when it comes to forward and backward inflation flat rate calculations.
The Chancellor also revealed that eligible tax deductions for losses from furnished holiday let owners will be restricted from April 2024. Details are still emerging, but this could make managing holiday rentals trickier.
Multiple Dwellings Relief Abolished
In a move affecting landlords with multiple properties in their portfolio, the government is abolishing Multiple Dwellings Relief (MDR) on Stamp Duty Land Tax from June 2024.
Currently, landlords with multiple properties must pay SDLT on the average price per dwelling, with rates increasing based on the property value. As such, MDR allows landlords to save on SDLT when buying multiple residential properties within the same or linked transactions.
Any deals that take place on, or before the 6th of March 2024 will still benefit from the scheme, as will transactions occurring before the 1st of June 2024.
Going forward, the full SDLT rate will apply to each property purchased, significantly increasing upfront costs for landlords expanding their portfolios. Careful financial planning and forecasting will be crucial to maintaining a stable cash flow when acquiring new properties.
Capital Gains Tax (CGT) Rate Adjustments
A fairly positive result for landlords following the Budget announcement is a reduction in the higher CGT rates applied to residential properties. This will be cut from 28% to 24% starting in April 2024. Private residence relief will remain unchanged.
While not a huge tax break in the scheme of things, this 4% reduction could provide some relief for landlords looking to sell their properties down the line. However, it’s believed that the tax-free allowance drop will result in higher CGT bills (an average increase of £2,610), which will be largely influenced by approximately 260,000 taxpayers now obligated to pay CGT when selling.
The government expects the lower CGT rate to increase tax receipts by encouraging more property transactions.
Empty Property Relief Rules Tightened
The Empty Property Relief “reset period” will be extended from 6 weeks to 13 weeks from April 2024. This relief provides a council tax exemption for qualifying properties left vacant for specified periods. The extended “reset period” means that periods must remain occupied for a longer time before the exemption eligibility window resets.
This has been introduced to dissuade landlords from repeatedly purchasing properties for short periods to claim relief. As such, landlords overseeing vacant properties may see their cash flow take a hit.
Non-Domicile Tax Status Scrapped
Overseas landlords of UK rental properties will now have to pay tax on any earnings made outside of the UK. The non-dom tax status will be replaced with a territorial tax regime based purely on residency. Therefore, foreign landlords may face higher tax bills on their collective income, which means that reviewing their structures and property arrangements will be vital.
No Stamp Duty Surcharge Relief (Yet)
There were no changes made to the incumbent 3% stamp duty surcharge, despite fervent rumours in the run-up to the Budget announcement.
While industry bodies like the National Residential Landlords Association (NRLA) had lobbied for this surcharge to be removed – even temporarily – the government has remained steadfast in its decisions to maintain it. It’s believed that scrapping the surcharge would pave the way for an influx of new rental homes. With a general election imminent, this topic could be widely debated.
Lingering Uncertainty on Renters Reform Bill
Unfortunately for landlords, the Spring Budget did not provide any additional clarity on the government’s forthcoming rental sector reforms. The Renters (Reform) Bill, at the time of this writing, is currently at the Report stage in the House of Lords.
With debates over amendments still required, this bill has not yet been given Royal Assent into Parliament. Therefore, for now, landlords will still be wondering exactly what the new framework for issues like Section 21 evictions and standards will look like.
For context, it’s been asserted by the Secretary of State for Levelling Up, Housing and Communities Michael Gove that this will be passed into law before the next general election. Time will tell, but landlords may have to make strategic short-term decisions while ambiguity remains.
Adapt to Change With Industry-Leading Property Management Software
As these recent updates have demonstrated, landlords must find new solutions to maintain profitability. Being proactive and carefully monitoring cash flow will be nothing new to seasoned landlords, but the various tax increases, deductions, adjustments, and abolishments will mean that careful decisions must be made.
With the help of innovative property management software solutions from Landlord Vision, landlords’ responsibilities will be made inherently easier. Consolidating portfolio data, automating compliance checks, and streamlining processes like accounting and cash flow management will allow you to cut all the administrative headaches. Using Landlord Vision’s software will give you more time and resources to analyse your unique situation and restructure accordingly. It can help you adapt easily to shifting market changes while staying firmly on top of your day-to-day obligations.
Landlord Vision has a full suite of cutting-edge tools tailored for landlords of all types, from buy-to-let properties to HMOs and social housing. In an age where fiscal and economic disruption is afoot, leveraging this type of software will prove vital for landlords trying to remain competitive and thrive in turbulent market conditions. Book a free demo of Landlord Vision today to see how much it can help you navigate the complex challenges brought about by the Spring Budget.
