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This year’s election welcomed a new Labour era in the UK, bringing with them changes that impact landlords and tenants alike. There is the shock proposal to abolish winter fuel allowances, adjustments to tax policies, and unexpected amendments that may be on the cards once normal business resumes following the summer.
So, whether you’re a landlord with a large portfolio or an investor keen to find ways to keep pace with challenges in the property market, this article analyses recent announcements, speculates on policy shifts, and outlines what landlords might consider going forward.
Upcoming measures
For most UK pensioners, Winter Fuel Payments can be worth between £100 and £300 but the Chancellor Rachel Reeves’s announcement earlier this summer. This benefit cut will potentially impact an estimated 10 million pensioners and take an average £200 off the cost of their heating and energy bills. With Age UK’s petition to end this cut rising in numbers daily, it’s worth considering ways to support tenants of pensionable age as a landlord.
Whether you’re currently letting a single property or several, it’s important to check in regularly with tenants. If anyone is worried by proposed winter fuel cuts, especially in the context of rising energy costs, you can look into making your properties more energy efficient. Or, perhaps negotiate a tenancy agreement that offers greater support with bills to alleviate anxiety.
While winter fuel cuts primarily target households, other measures might be beneficial to landlords directly or indirectly. For instance, increased subsidies or rebates for energy-efficient upgrades are likely to be on the horizon, providing you with opportunities to reduce energy costs across your large portfolio or if you’re starting out. Sustainable upgrades can enhance the appeal of your properties to eco-conscious renters and boost its resale and rental value in the long term.
Tax considerations for landlords
Since this year’s election, one of the key areas for landlords has been around taxes. In recent weeks, with higher mortgage rates, tightened regulations, and unfavourable tax changes, more and more buy-to-let investors are debating whether to sell up. Changes in tax regulations will often have implications on investment returns, on property-buying decisions, and on your longer-term investment strategies, and the government’s feared adjustments in several key areas need to be thought about.
When it comes to Capital Gains Tax (CGT), the government has announced plans to amend CGT rules, which has been grabbing the spotlight. There is widespread speculation that the CGT tax rates may rise in the Autumn Budget on the 30th October, 2024. The potential rise will be in line to match the Income Tax rates, which might see the top rate hitting 28%. Such alterations may increase tax burdens.
Moreover, there has been speculation about an increase in inheritance tax that landlords might want to take into account if you’re planning to expand a portfolio in the future, downsize your personal residence, and make an informed decision about reinvesting in your existing assets.
Likewise, possible Stamp Duty changes from Labour might sway your mind as these include a possible hike in rates or targeted relief for certain types of property investments. These might be homes in high-demand rental areas or for properties that require substantial renovations. Once you have worked out the estimated cost of an extension versus the amount you might pay for a new property, you may opt to pause proceedings for the time being.
Ongoing positive news for property investors
Despite changes in tax rises, the benefits of investing in property remain positive. When it comes to buy-to-lets, there are plenty of reasons to hold onto investment properties and grow your portfolio if the timing is right. For now, mortgage rates continue to drop which is good news for people buying. Meanwhile, the Bank of England’s drop in mortgages’ base rates was healthier news for lenders and landlords.
The rental market has remained buoyant since the election, with an average increase of 8.6% in private rental prices from July 2023 to July 2024, a much faster increase than we’re seeing with house prices, making the rental market one where there is a larger income potential. Similarly, the government’s touted adjustments to Stamp Duty can boost the property market, which is great news if you’re looking to expand your portfolio now or in the future.
Likewise, when it comes to Rental Income Adjustments, with the lack of available properties, rents are estimated to keep rising up while sales activity looks much healthier in the wake of the general election, according to the latest reports from the RICS. The organisation had also described an ongoing shortfall in the supply pipeline meaning that rents were also predicted to continue rising.
In response to the economic conditions influenced by policy changes, the government may implement measures affecting rental income. These could range from adjustments in the amount of rental income that is taxable, to more direct forms of support for landlords in the event of tenant financial hardships, which could affect landlords’ income stability.
Regulatory changes and expectations
Beyond financial incentives and tax considerations, regulatory changes are also a key area to watch:
In terms of housing quality standards, there might be new policy changes to housing regulations that might impact landlords and agencies overseeing property maintenance and necessary upgrades. In whichever case, landlords will be alerted to such changes that require them. Although initially costly, these improvements, especially sustainable ones, are welcomed by landlords and tenants alike, and can yield higher rental and added value to properties.
In addition, reforms to tenancy laws could be on the table, potentially affecting eviction processes, tenant rights, and landlord responsibilities. These changes could require landlords to adapt their management practices and agreements. Meanwhile, easing back on planning permission for various renovations and upgrades will be welcome news if you’re looking to improve or significantly renovate any properties.
Strategies for adapting to change
Whatever announcements come into fruition in the Autumn Budget and beyond, there are several strategies that you might want to consider, including:
- Stay Informed: Keeping abreast of legal and tax changes as they are announced can help landlords plan and react more effectively.
- Consult Professionals: Engaging with tax advisors and legal professionals can provide insights tailored to individual circumstances, especially in complex areas like CGT or corporate tax planning.
- Invest in Property Upgrades: Anticipating regulatory changes by investing in property improvements can pre-emptively address compliance issues and enhance property values.
- Diversify Investments: Considering different types of property investments or geographical areas might mitigate risks associated with localised economic downturns.
Whether expected changes do affect taxes, property laws, and impact landlords or tenants, being proactive and staying well informed is one of the best strategies to have. Changes can present both challenges as well as opportunities to reinvest, improve your property’s value, rental appeal, and long-term profitability.
The key is to understand any developments so you are able to position yourself to make the right buying, investing, or letting decision to and reap the financial and sustainable benefits going forward. For more advice on managing your Buy to Let efficiently and profitably, speak to one of our team today.
