Post Autumn Budget – A Long-Term Net Positive for Landlords in 2025
A few months on after Rachel Reeves’s Autumn Budget, and Labour’s first budget for 14 years, the proverbial dust has now settled. Despite the noise, has the Autumn Budget actually offered some positive assurance for landlords in 2025?
With the considerable discourse across some media, it is now a good time to analyse some of the key announcements on a more granular level, especially those that are likely to impact landlords’ immediate strategy, and of course what all of this implies for landlords and the wider private rented sector longer-term.
One of the more surprising announcements was that despite CGT increasing, the rate on residential properties will not actually change. After the widely anticipated increase in CGT in respect of property, this offers much relief for landlords who may wish to dispose of a particular property. These rates remain at 18 per cent for basic rate taxpayers, and 24 per cent for higher and additional rate taxpayers* . Similarly, there were no changes to Inheritance tax rates which will come as a relief to many landlords.
Matthew Rowne
Director
Indeed, despite much discontent with the budget as a whole, there are plenty of reasons that will be compelling many landlords to hold onto their investments and reap the benefits of potentially increasing yields in the short to medium term.
Most post-budget conversation amongst lenders, brokerages, and landlords, centred around Reeves’s declaration that anyone who plans to buy a buy to let or second home will be affected by a 5% SDLT surcharge, a 2% increase, effective almost immediately, (albeit leniency was presented for those that had exchanged contracts prior to the announcement)**. Additionally, there has been no commitment yet from the Government for an extension to the current threshold in respect of the minimum rate at which people pay Stamp Duty, due to return to £125,000 in March 2025 from the current threshold of £250,000.
Anecdotally we have not seen this impact purchases or existing chains, however we accept that there is bias with our particular entrepreneurial client demographic, who are much more likely to go back to the vendor in an attempt to negotiate the additional 2% off of the agreed purchase price, or at least meet somewhere in the middle, rather than pull out of what is perceived an otherwise robust investment at the ‘eleventh hour’.
Of course looking ahead, the hike in SDLT could discourage some new landlords from investing in their first buy to let at this time, or potentially discourage a portion of existing landlords from aggressively expanding their portfolios. Indeed for those landlords still considering incorporation of their portfolio currently held in personal names, this additional tax burden to execute may create some reticence for those that would not benefit from Section 162 relief.
However, this should be considered against the backdrop that should properties within the PRS continue to fall behind demand for affordable housing stock, then this effective net reduction in rental properties will undoubtedly result in further rent increases, (and by default higher yielding investments for those committed landlords). Indeed the NRLA have stated that ‘The Chancellor has failed to heed the warnings of the Institute for Fiscal Studies that higher taxes on the rental market lead only to rents going up.’ ***
Make no mistake about it, the nationwide shortfall in housing stock is real, very real. According to Zoopla ****, this has led to an average of twenty-one prospective tenants competing for each available rental property on the market, and a scarcely comprehensible £1.74 Billion spent by local housing in 2022/2023 in providing temporary accommodation.
There is no denying that overall it was a disappointing budget for many, and the Government needs to be incredibly careful as the wider policy needs to recognise that the PRS houses many of society’s most vulnerable. By penalising landlords unfairly then we risk cannibalising the very system that currently provides the safety net around those individuals that the Government is failing. However despite the noise, there are many reasons for landlords to see the Autumn Budget, and indeed the longer-term economic vista as very much net positive.
Sources: * gov.uk – autumn budget overview, ** gov.uk- autumn budget overview, *** NRLA, **** Zoopla
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