Chancellor Jeremy Hunts’ Autumn Statement has been much anticipated, not least by the Private Rental Sector and Landlords in general. With many hoping for some good news with measures set to ease the financial pressure on Landlords, it was disappointing to see that little help was provided. With the introduction of Section 24 back in 2015, increasing the tax burden on buy-to-let income, many opted to set up Limited Companies to benefit from some relief and transfer rental properties in to that entity.
Section 24 rules wouldn’t affect rental properties in Limited companies so a tax saving was made.
However, with the Autumn Statement came a double (or indeed triple) whammy. Earlier changes to Corporation tax, which were due to increase to 25%, quashed by the Liz Truss, Kwasi Kwarteng ‘mini-budget’ and then re-introduced by Mr Hunt meant an increased tax grab on any Limited company profit.
The Autumn Statement then introduced increased Tax on dividend payments as well as an increased Capital Gains tax burden if selling a property, meaning there are costly issues whichever way a landlord decides to go.
Landlords have a difficult choice
With seemingly an attack from all sides on rental property owners, many Landlords have a difficult decision to make and whether to stick or twist. Retaining or selling rental properties with have an increased cost in terms of tax.
Whilst the Private Rental Market remains very strong with limited available stock and increasing rents, landlords could decide to stick it out. Unfortunately, this will come at a cost of increased tax down the line.
On the other hand, with property prices expected to fall, Landlords may take the decision to sell while prices remain at a peak. If they wait, houses prices may fall and owners will then be hit by the Capital gains tax increase.
The more Landlords that sell could of course help to fuel further rises in rents as the number of available properties is reduced further. First time buyers may well be able to step in to the market to snap up newly available, cheaper properties, without the competition from some Landlords who may leave the sector. However, with mortgage rate increases and the withdrawal of some mortgage products over recent months, home buying costs will be distinctly higher.
Stamp Duty Changes Could Have Helped Landlords
Stamp Duty for residential home buyers was cut by Kwasi Kwarteng in his mini budget in September 2022 by increasing the threshold whereby any Stamp Duty is paid to £250,000. This was intended to be a permanent change but Jeremy Hunt changed that to temporary with an end date of April 2025.
The Private rental Sector and others were hoping Stamp Duty Cuts would have been extended to rental and other second home by the Chancellor in his Autumn Statement. This would have reduced the liability on new Buy-to-Let purchases making it a more attractive proposition. However, this change wasn’t forthcoming.
An opportunity to boost the rental sector was missed. New landlords are greatly needed as the lack of available stock continues to fuel rent increases. Incentivising new Landlords can only help to alleviate this situation. It can only be hoped that the government takes heed at some stage.
Advertise Your Rooms To Rent
Of course, although costs and tax are increasing for many, renting a property can still be a source or valuable income. Whether you are a landlord with one or more properties or a home owner, renting a room in your own home, it can help to alleviate some financial concerns. Of course, renting a room in your own home bring extra funds and without any tax implications under the governments 'Rent a Room Scheme'.