There was something slightly ominous about delivering the Autumn Budget on the eve of Halloween and for many, the announcements made by Chancellor Rachel Reeves provided a fright.
For those working in lettings and small scale property investment, the Autumn Budget was a barometer of how far Labour is prepared to go to oust private landlords from the rental sector. So, how did the Budget pan out?
Capital gains tax: status quo for property sales
One announcement may have bypassed landlords as it was somewhat of an anticlimax. Capital gains tax applied to non-residential assets is set to rise, from 10% to 18% for basic rate taxpayers, and from 20% to 24% for those who pay higher and additional rate tax.
The Government, however, is freezing capital gains tax paid on profits when selling an additional property. The rates will stay at 18% for basic rate taxpayers, and 24% for those in the higher and additional rate tax brackets.
What can we draw from this decision? While it hasn’t become cheaper to exit the buy-to-let market when selling rental properties, it hasn’t become more expensive either. A hike in property capital gains tax may have encouraged more landlords to stick with the private rental sector but the tax freeze will do nothing to deter a mass exodus.
Brakes are on new buy-to-let purchases
There was an unexpected stamp duty announcement that definitely fired a warning shot to small, private landlords considering expanding their buy-to-let portfolios and potential property investors wanting to start their landlord journey.
The stamp duty surcharge applied to the purchase of additional properties – which can take the form of private rentals, second homes and holiday lets – has risen. The Chancellor wasted no time in implementing the change, with the new rate effective from 31st October 2024.
£4,000 more expensive to invest in property
Those buying an additional property to rent out will now pay 5% extra in stamp duty – up from 3%. The Nationwide was quick in crunching the numbers to put that hike into financial perspective. Using data for a 12 month period up until June 2024, it says anyone making a buy-to-let purchase will now pay an extra £4,000 in stamp duty. It added that the increase will impact around one in five residential transactions in England & Northern Ireland.
Historical punishment
With the Autumn Budget now delivered, we are beginning to see the bigger buy-to-let picture. Historic fiscal attacks on landlords, such as Section 24 and the Tenant Fees Act, started to erode profits. Liz Truss’s disastrous tenure heaped on the misery, with mortgage rates rapidly increasing.
Rishi Sunak followed and while in power, the Levelling Up and Regeneration Act 2023 passed into law, containing legislation that allows local councils to charge second home owners in England twice as much council tax as owner-occupiers – a change that comes into force in April 2025.
Tumultuous times ahead
Next year will likely see the introduction of the Renters’ Rights Bill, with the end to Section 21 notices, and the revision of the mandatory EPC for private rentals – up from an E to a C. Sadly, there will be more hoops for landlords to jump through and intensive investment needed to keep compliant.
There’s simply no financial incentive for new landlords to join the sector or for current buy-to-let owners to stick around. What exists is a widespread conclusion that Labour would prefer tenants to be served by large corporates and hefty investment vehicles operating under the Build to Rent framework.
Start an exit strategy now
If you’re a modest individual with one or two buy-to-lets, or even a more serious investor with a portfolio of rental properties, 2025 may be the year your buy-to-let costs you money.
Selling a rental property to LandlordBuyer provides a simple and speedy way to exit the market. With exchange and completion generally achieved in just over a month - and no need to sell on the open market - you can walk away before any further Labour changes take hold.
Your buy-to-let doesn’t have to have vacant possession either. LandlordBuyer will purchase with sitting tenants, and we also buy flats with short leases, rent arrears and structural issues.
If you’re ready to leave buy-to-let behind and would like a cash offer, contact us today.