Spring Budget 2024 – The Landlord Perspective
Published on March 30, 2024 by Sarah Mac
The 2024 Spring Budget on 6th March introduced a number of changes that will affect private landlords and furnished holiday let owners.
Here’s a round-up of what’s set to impact the industry:
Increased VAT Registration Threshold
In a move to ‘help the small business grow’, the Chancellor announced that the VAT registration threshold will be increased from £85,000 to £90,000 and the deregistration threshold from £83,000 to £88,000 from 1 April 2024.
This is the first time the limit has been raised since April 2017.
Capital Gains Tax Reduction
The Annual Exemption Allowance (AEA) for Capital Gains Tax was £6,000 for 2023/24 tax year, and is set to drop to £3,000 for 24/25.
However, Capital Gains Tax rates on the sale of residential properties for higher rate taxpayers will drop from 28% to 24% for sales made within the 2024/25 tax year. The
This should assist those paying tax at the higher rate by offsetting the reduction in the personal tax free allowance. The 18% basic rate remains unchanged, however.
Multiple Dwellings Relief to be Abolished
Currently, if you buy more than one property at a time, either as part of the same transaction or linked transactions, it is possible to claim Stamp Duty relief. This relief averages out the price per property, which allows a tax liability reduction on the higher value properties within the transaction.
However, this relief is being removed for transactions completing from 1 June 2024, although it will still apply after that date for contracts exchanged on or before 6 March 2024.
Furnished Holiday Let Relief to be Scrapped
Landlords letting property as a furnished holiday let are currently able to claim holiday let relief. This allows the full cost of mortgage interest and other financial costs to be deducted from the rental income. It also provides for CGT to be applied at a reduced rate of 10% when the property is sold, providing the seller qualifies for Business Asset Disposal Relief.
However, this relief is set to be scrapped from 6 April 2025, unless the properties are held in a limited company. Should this be the case, the finance costs can continue to be deducted from the rental income.
Draft legislation is yet to be published, but once it is, it will set out the specific measures that will apply.
This means that landlords of furnished holiday lets will need to reassess the viability of their investment in order to ensure it continues to provide a sufficient return once the relief is removed.
It may be that after April 2025, landlords may instead be able to claim a deduction from profits for the cost of replacing domestic items, although this is yet to be confirmed.
National Insurance Contributions to be Reduced
Further to the announcement in the November 2024 Autumn Budget that Class 4 (Self-Employed) National Insurance Contributions would be reduced from 9% to 8%, a further 2% drop has now been introduced.
This means that for the 2024/24 tax year, self-employed landlords earning profits between £12,750 and £50,270 will pay Class 4 National Insurance at the reduced rate of 6%.
Class 1 (Employed) National Insurance Contributions will also drop from 6 April 2024, from 10% to 8%.
Child Benefit Threshold Raised
Landlords or their partners in receipt of Child Benefit will see the threshold at which High Income Child Benefit is lost increase.
Currently, parents with a total household income of over £50,000 will start to lose Child Benefit. This threshold will rise to £60,000 from 6 April 2024.
Local Area Investment
Despite the fact that there is a considerable deficit in terms of properties for purchase and rent, there were no notable announcements in the Spring Budget to help increase the supply of new homes in the UK.
However, the Chancellor did outline specific areas set to receive additional funding. This should support and encourage new home building within those locations.
Barking Riverside and Canary Wharf were mentioned in this plan, with £242 million worth of investment pledged to help build in the region of 8,000 homes and develop Canary Wharf into a tech hub for companies in the life sciences sector.
Cambridge has also been identified as a location for investment, with the government seeking to transform it into the ‘Silicon Valley of Europe’ and become a leading medical research and health science centre. Long term funding has been promised, with the goal of creating 250,000 new homes.
For property investors, it is worth looking at local council plans to see where investment is set to be injected. Regeneration can improve demand for housing as well as push up rental values, so there could well be some prime opportunities to explore.