Revealed – what does the Autumn Statement mean for landlords?
In a much-awaited Autumn Statement, Chancellor Jeremy Hunt – who has been in the role for only just over a month – set out the government’s tax and spending plans.
As predicted, it involved some large tax rises and spending cuts at Hunt aimed to fill a fiscal black hole to the tune of £55 billion – caused by Covid, Brexit, the war in Ukraine, soaring inflation and the disastrous mini-Budget from Liz Truss and Kwasi Kwarteng.
Hunt said he was delivering a plan which would tackle the cost-of-living crisis and rebuild the UK economy. He also said he would be prioritising stability, growth and protecting public services.
His speech didn’t have much to say about housing specifically, but he did set out a number of measures that will directly affect landlords.
Below, we take a look at what these were.
Capital gains tax allowance halved
The Chancellor announced that he would more than halve the tax-free allowance for capital gains in the next tax year (2023-24), reducing it from £12,300 to £6,000. In the next tax year (2024-25), it will be halved again to £3,000 in 2024-25. Hunt said this was to make the tax system fairer and restore the public purse.
It will be those landlords seeking to sell their homes who will be most affected by this change, with CGT charged at a much higher rate for residential property sales.
More landlords could look to leave the sector earlier than planned as a result of the move, which would in turn have a negative impact on rental supply.
“These swingeing cuts to Capital Gains Tax allowances will dissuade investment for years to come,” Ben Beadle, CEO of landlord trade body NRLA, commented, saying that it will deter investment in new rental homes and grow the cost of renting.
Greater tax load for higher earners
Hunt also used his Commons speech to reveal that higher earners will begin paying the top rate of tax (45%) when they earn £125,140, down from £150,000 before.
As a consequence of this, more landlords could be forced into the highest paying tax bracket. This is likely to then have an impact on the profits they can make because of the changes to mortgage interest tax relief which were first introduced in April 2017.
Hunt announced other tax changes in his address, stating that Inheritance Tax thresholds will be frozen for a further two years, which will mean hundreds of thousands of home owners remain subject to paying this tax.
Time-limited stamp duty cut
In a much more unexpected move, Hunt said the recent cuts to stamp duty would be time-limited, ceasing on March 31 2025.
For the next few years, there is now effectively another stamp duty holiday – something which will encourage more buyers, including landlords, to take advantage of the potential savings on offer.
Kwarteng, in his now infamous mini-Budget, had increased the nil rate threshold for stamp duty from £125,000 to £250,000, while also upping threshold at which first-time buyers pay stamp duty on their first home to £425,000 from £300,000 on purchases worth up to £625,000.
But that will all come to an end in March 2025, which could lead to a late rush for homes before the effective holiday ends.
Hunt’s wide-ranging speech, which lasted for nearly an hour, also included a number of other measures – ranging from electric cars to the energy price guarantee, explained in much greater detail here.
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