The UK Government’s Autumn Budget 2024, presented by Chancellor Rachel Reeves, has introduced several key changes that directly impact landlords. While some of the measures bring challenges, others may offer opportunities for landlords who stay informed and adapt to the evolving market.
Here’s a breakdown of the key announcements affecting landlords, along with an analysis of what these changes could mean for your investments and future planning.
Key Takeaways from the Autumn Budget 2024 for Landlords:
- Stamp Duty Increase: Higher rate for additional properties raised from 3% to 5% as of October 30, 2024.
- Wage Increases: National Living Wage rises by 6.7% in April 2025, improving tenant affordability.
- Housing Benefits Frozen: No increase in housing benefits, potentially impacting private tenants and landlords’ ability to raise rents.
- National Insurance: Employer NICs rise from 13.8% to 15%, with a reduced threshold for contributions.
- Investment in Housing: £5 billion allocated to improve housing supply and support Build-to-Rent sector.
- Capital Gains Tax Unchanged: Rates for property remain at 18% (lower-rate) and 24% (higher-rate).
- Inheritance Tax: Pensions to be included in estates for IHT from April 2027; 50% relief on larger business/agricultural estates.
1. Increased Stamp Duty for Additional Properties
The headline change in the budget for landlords is the increase in Stamp Duty Land Tax (SDLT) on additional properties, such as buy-to-let homes. As of October 30, 2024, the higher rate of Stamp Duty has risen from 3% to 5% for additional dwellings. This change applies to property purchases not under contract before the cut-off date, increasing the up-front cost for landlords looking to expand their portfolios.
What This Means for Landlords:
- If you’re purchasing a property for £300,000, this means an additional £6,000 in Stamp Duty costs. For example, previous SDLT costs would be £11,500, but now they will rise to £17,500.
- Although this hike may seem steep, it’s important to consider the long-term investment potential. Property investment remains attractive, with rental demand still outstripping supply across much of the country, and rising rents offering an ongoing revenue stream. Additionally, Stamp Duty can be deducted from your capital gains tax liability when you sell the property, easing the overall tax burden in the long run.
However, the increased tax burden could be a deterrent for some landlords, particularly those operating on thinner profit margins, and might encourage some to scale back their investments.
2. Wages and Rent Affordability
The government’s announcement to raise the minimum wage by 6.7% in April 2025 is a welcome boost for tenants on lower incomes. The national living wage will increase to £12.20 per hour for over-21s, and £10 for 18-21 year-olds. This could enhance tenant affordability and help to keep rents in line with income growth.
However, while the wage increase should help tenants, the freezing of housing benefits is a cause for concern. According to the Joseph Rowntree Foundation, this means private tenants receiving housing benefits could be £243 worse off per year. For landlords, this could impact their ability to raise rents for tenants on benefits, making it more difficult to maintain profit margins.
Potential Impact:
- Increased demand for rental properties as affordability improves for many tenants, but potentially higher vacancy rates for tenants on benefits, especially in areas where housing benefit payments don’t keep pace with rent increases.
3. Investment in Housing and Infrastructure
The Chancellor also outlined an investment package of over £5 billion aimed at improving housing supply. This includes additional funding for the Affordable Homes Programme and expanded support for the Build-to-Rent sector. This investment is expected to ease some of the pressure on the private rented sector, which currently houses over 1 million households that are eligible for social housing.
For landlords, this increased investment in housing could help alleviate the wider housing shortage, ensuring better overall availability of rental properties in the future.
4. National Insurance Contributions and Business Costs
The budget also included changes to National Insurance contributions (NIC) for employers. The rate will rise from 13.8% to 15% for larger employers, but smaller businesses will receive support via an increase in the Employment Allowance to £10,500. This will make hiring employees more costly for some landlords who manage larger properties or employ staff for property maintenance.
What This Means for Landlords:
- If you employ staff, such as cleaners or maintenance workers, this change could increase your operational costs, potentially squeezing margins. On the other hand, smaller landlords may benefit from the expanded employment allowance, which could ease the cost of hiring help.
5. Inheritance Tax Changes
One of the more significant announcements in the budget is the upcoming changes to inheritance tax. From April 2027, pensions will become part of an individual’s estate for inheritance tax purposes. This could impact landlords with substantial portfolios or retirement plans tied to property investments. Additionally, the 100% relief on business and agricultural property will be reduced to 50% for estates valued over £1 million, potentially affecting family-run property businesses and larger landowners.
6. Capital Gains Tax – No Change for Property
Despite concerns about potential changes to Capital Gains Tax (CGT), the Chancellor has opted to keep the rates unchanged for property investors. The tax rate remains at 18% for lower-rate taxpayers and 24% for higher-rate taxpayers. However, the budget did raise CGT rates on other assets such as stocks and shares, which could affect investors with diverse portfolios.
Why This Matters:
- For landlords, the stability of CGT rates on property means that property sales and disposals will continue to be taxed at current rates, without any immediate changes. However, landlords should still consider the implications of future tax changes as part of their long-term investment strategy.
What Should Landlords Do Now?
With these changes in mind, it’s crucial for landlords to stay informed and make strategic decisions. While the increased Stamp Duty surcharge is a significant cost for those looking to expand their portfolios, the broader outlook for the rental market remains positive. Demand continues to outpace supply, and rental income is likely to rise, particularly in areas where housing demand is high.
To navigate these changes effectively, landlords should consider:
- Reviewing the local rental market: Understanding local supply and demand will help ensure that your rental property remains competitive and profitable.
- Consulting with experts: Given the tax changes and evolving regulations, working with a specialist accountant can help mitigate potential tax liabilities.
- Long-term planning: While upfront costs may have increased, property investment can still be highly profitable over time, especially with careful planning and ongoing management.
Final Thoughts
The Autumn Budget 2024 has introduced a range of measures that will impact landlords in both the short and long term. While the increase in Stamp Duty may raise costs for landlords purchasing additional properties, there are still opportunities for growth within the rental market. By staying informed and adapting to these changes, landlords can continue to thrive in a dynamic and evolving property market.
