The Spring Budget 2024: What Does It Mean for Landlords?
Every Budget statement, to steal a much-used phrase, is “hotly anticipated” and it captures many headlines both before and after.
Political and business speculation starts early, followed by instant, lengthy comment and analysis – and then reams of column inches from both sides of the partisan divide. Sometimes, examination focuses as much on what wasn’t said as much as what was. If you watched the Chancellor’s speech yesterday, as we did, you’ll have been struck not only by what an utter bear pit it was – the noise! – but also by how small some figures were: Gross Domestic Product (GDP) grew by just 0.8% in 2023, with the Office of Budget Responsibility predicting the same percentage growth this year.
Tough Times for All
The last few years have been exceptionally hard for the UK economy. We’ve experienced drastic price hikes in energy prices due to the war in Ukraine, inflation remains high globally, and of course, the shockwaves from Covid-19 are still spreading outwards. According to the OBR, we’re still paying our debts back and will be doing so for a long time.
However, without going into too much detail, things are slowly improving right here right now.
So, in light of all this, what did the Budget mean for landlords? In this article, we’ll review all the changes you need to know and how they could affect you. Plus, we’ll touch on an issue that wasn’t mentioned at all: the chronic, ongoing lack of properties to rent in the private sector.
Here are the Spring Budget Headlines
National Insurance will be lowered from 10 percent to eight percent starting next month. This 2p reduction was front and centre of the Chancellor’s statement, and of course, this is positive news for landlords’ income—and for all working people.
For example, if your income from property rentals and other sources is £50,000 or £75,000, you could save £749 or £754, respectively.
Interestingly, Jeremy Hunt dropped strong hints that he’s looking to abolish NI entirely, suggesting that it’s a form of double taxation. Canny political pundits picked up on a degree of possible electioneering and the fact that this could, therefore, be a key manifesto pledge. However, there’s no confirmed plan for these plans, so we’ll all have to wait for developments.
Offsetting this was the announcement that the income tax personal allowance and all tax bands will remain frozen until 2028. This means you could be pulled into a higher tax band through what has become known as fiscal drag.
Then, we had a few “normal” announcements, usual:
· A packet of cigarettes is going to cost an eye-watering £16; a compelling reason to stop smoking if ever there was one, but – there’s a new tax on vapes.
· Duty on alcohol has been frozen until early next year.
· The high-income child benefit charge has been raised from £50,000 to £60,000.
· Fuel duty will be frozen, and the previous 5p cut will be extended.
And one of note:
The special tax status for non-domiciled people in the UK (so-called non-doms), which allows them to pay tax only on their UK earnings, will be abolished. From April 2025, it will be replaced with a more straightforward system.
Further Changes That Landlords Need to Know About
The government wants to promote the housing market and boost property transactions – not least for first-time buyers.
Equally, changes to CGT have been overdue for some time; therefore, this new legislation will most certainly impact you as a landlord. Currently, the standard rate of CGT is 20%, with an additional 8% charged on residential property transactions (excluding primary residences). From 6th April 2024, this 28% levy will be reduced to 24% to encourage landlords and second-home owners to sell their properties.
The 18% rate for gains made in the lower rate band will remain unchanged.
Further, the Chancellor has abolished the Furnished Holiday Lettings (FHL) scheme, thus removing the incentive for landlords to offer shorter-term holiday lets rather than long-term residential tenancy agreements. At the moment, there are about 127,000 properties in the UK registered in this way. And, at present, landlords can deduct the full cost of their mortgage interest payments from their rental income.
Also on its way out is Multiple Dwellings Relief, a bulk purchase relief in the Stamp Duty regime for investors buying more than one property in a single transaction. According to Mr Hunt, this latter was being “regularly abused”. As of April 2025, this will be no more.
VAT Registration Threshold
Your property portfolio is your business. Are you VAT registered? If not, you now have more wiggle room. You will be able to earn £5,000 more over a 12-month period before you need to register to pay Value Added Tax. Presently £85,000, it will be rising to £90,000. year as a therefore
What Wasn’t Mentioned?
Plans to introduce a 99% mortgage appear to have been quietly shelved, at least for now. Commentators were nervous at this possibility, as it could have overheated the housing market. Watch this space.
The NRLA has spoken and has expressed its disappointment with the March 6th Budget in no uncertain terms:
In brief, on average, 11 would-be tenants are chasing every available property to rent at any one time, and more homes are urgently needed. In their opinion, the government has failed to introduce much-needed measures to tackle the current housing crisis. For example, bold proposals regarding stamp duty changes and mortgage interest relief; actions that could actively encourage more landlords to stay in the sector. Plus, investment in more affordable build-to-rent homes.
In their opinion, the scrapping of the FHL scheme tinkers around the edges.
Key Take Aways from Brighton Homes
In our opinion, investing in bricks and mortar is still a highly viable option. Because of a supply shortage (and yes, we acknowledge this issue), and the fact that Sussex is a desirable destination, rental yields are still high.
Good landlords in search of long-term, reliable tenants are in demand.
Our advice – is to take advice. Whether you’ve engaged another agency or are considering us for the first time, feel free to get in touch. With our expertise and experience, the Brighton Homes team will offer you clear, jargon-free guidance on everything that happened in the budget yesterday. And, so much more. We believe we have the skills you need to help your property portfolio business become the profitable enterprise it deserves to be.
· Now is the time. Let’s connect.