Autumn Budget Summary for Landlords
The Labour Government’s 2024 Autumn Budget brings a host of new tax measures aimed primarily at second homeowners, buy-to-let landlords, holiday lettings, and employers.
These changes are designed to realign tax rates and incentivise primary home ownership while also putting employers on notice to prepare for increased costs in the coming years. For property owners and businesses alike, understanding these new measures is essential. Here’s what you need to know and what steps you might consider.
Capital Gains Tax: Increased Rates for 2024
The new Capital Gains Tax (CGT) rates have increased to 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. Up from 10% and 20%, bringing them in line with CGT rates on residential property sales. If you want to offload assets or property, transactions completed from 30 October 2024 onwards will be subject to these new rates.
For investors, mitigation strategies become particularly valuable. Transferring assets between spouses or selling assets at a loss can help reduce the tax burden. While the increase isn’t as steep as some feared, the added complexity—particularly within the same tax year—means keeping up with reporting requirements is critical.
Stamp Duty Land Tax: Increased Surcharge on Additional Properties
The Budget also sees a rise in the Stamp Duty Land Tax (SDLT) surcharge for additional properties, moving from 3% to 5%. Starting 31 October 2024, this extra charge aims to discourage second-home purchases and limit buy-to-let acquisitions. This move is part of a broader plan to prioritise homeownership for first-time buyers and those purchasing their primary residence. The government projects this will unlock 130,000 transactions over five years, potentially shifting the housing market in favour of first-time buyers.
The SDLT on properties over £500,000 for corporate buyers has also increased from 15% to 17%. This move further signals the government’s intent to discourage secondary property ownership while ensuring more prominent investors face a heavier tax burden. These changes, combined with previous limits on tax relief for mortgage interest, may discourage new entrants into the buy-to-let market.
Abolition of Furnished Holiday Lettings Tax Regime
From April 2025, the current tax relief for furnished holiday lettings will be abolished. The change, announced in the July 2024 Budget, will remove the unrestricted loan interest deductions previously enjoyed by holiday rental landlords. This will impact capital gains and income tax treatments, though VAT rules remain unchanged.
Landlords using this scheme must assess how the changes affect their bottom line. The elimination of favourable tax treatment could significantly reduce profits. Those renting short-term holiday properties will now be taxed similarly to traditional rental properties, which could reshape the market for these types of accommodations.
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Making Tax Digital: Rollout for Landlords and Sole Traders
The government’s long-term initiative to digitalise tax reporting, Making Tax Digital (MTD), will begin for income tax purposes from April 2026 for those with incomes over £50,000, with an expansion to £30,000 by April 2027. Sole traders and landlords with incomes above £20,000 will need to prepare for digital tax compliance. However, the exact rollout timing is still under review.
These new requirements will bring significant administrative changes, especially for landlords. While digital record-keeping might ultimately streamline tax filing, the transition will require time and resources. This step underscores the government’s push towards a more modern, digitised tax framework that, in theory, could simplify and increase accuracy in tax reporting.
National Insurance and National Living Wage: Changes for Employers
Employers are also in for a tax shake-up. From April 2025, the National Insurance Contributions (NICs) rate for employers will increase from 13.8% to 15%, with the income threshold dropping from £9,100 to £5,000. To offset this for small businesses, the Employment Allowance will rise from £5,000 to £10,500, extending eligibility by removing the £100,000 NIC bill limit.
These additional costs could impact the valuation of businesses, particularly those with large payrolls. For example, a company with 100 employees earning £35,000 each would see an annual cost increase of nearly £925 per employee—an amount that could cut into profitability or business valuations if left unaddressed.
The National Living Wage will also increase to £12.21 per hour, with a 16.3% hike for younger workers, starting April 2025. While higher wages provide a boost for employees, they will add further strain on many employers. Firms may need to adapt by improving productivity or trimming costs to manage these increased expenses.
The 2024 Budget signals substantial tax and administrative shifts that will impact landlords, homeowners, and employers alike. From capital gains to stamp duty surcharges and digital tax initiatives, these changes introduce more complexity but also an opportunity for proactive financial planning.
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