Spring Budget Landlords

The Spring 2024 budget was a much-anticipated event for business owners, landlords, holiday let owners and the general public and in some cases, even a cause for great anxiety. With the cost of living crisis wreaking havoc across the country and leaving the majority having to find new ways to manage their money, the Spring Budget was always set to disrupt some key parts of our finances and taxation. It certainly delivered a mixed bag for landlords, with measures impacting both traditional buy-to-let properties and holiday rentals. Here’s a breakdown of the key changes.

Tax Cuts for Traditional Landlords

Tax cuts are often a welcome part of any budget, and this year for Landlords, there was one key tax change that is likely to make a difference. The Chancellor announced this year that there would be a reduction in the higher rate of Capital Gains Tax (CGT), seeing the higher rate of tax on property sales reduced from its previous 28% to 24%. This tax applies to any properties that aren’t the main home when a person makes a profit on selling that property. This is particularly prevalent in buy-to-let properties, business premises, land and inherited properties. This relief is set to come into effect in April 2024 and could make selling properties a much more attractive option for Landlords. It’s possible that we could see an increase in owners of multiple properties looking to sell up for increased profits.

Crackdown on Holiday Lets

As part of the Spring Budget’s goals to deliver personal tax cuts, landlords of holiday lets are set to lose out due to the abolishment of the Furnished Holiday Lettings (FHL) Scheme. This change won’t come into effect until April 2025 but will mean that holiday landlords could lose an average of £2,835 on each property that they own. While this change is set to improve rental availability for local people in their area by reducing the number of holiday lets, this could have a significant impact on landlords. 

The current FHL allows holiday let owners to claim tax advantages, including full mortgage interest dedication and lower CGT, however, the scheme will make owning these properties a more costly and less profitable option. This could therefore lead to an increase in the number of Landlords selling up their holiday properties, or even changing them to standard rental or long-term let properties. These changes are thought to be a step towards opening up more rental units and properties in major tourist hubs and cities, allowing for standard renters and tenants, rather than just holidaymakers.

What Could Be The Overall Impact?

The changes mentioned above could have a huge impact on how the rental and holiday markets operate in the coming years. With Landlords able to sell off properties for higher profits, and holiday lets potentially providing more expensive, the market could shift and change in favour of those looking to find properties in otherwise highly sought-after areas. These changes could see:

  • A Busy Housing Market – With Landlords potentially deciding to sell their properties, whether for increased profit or due to holiday let changes, the housing market 
  • A Potential Rise in Holiday Let Sale Rates: With reduced profitability due to the FHL scheme’s removal, holiday let owners could be facing some troubling times ahead, to the point where some holiday let owners might exit the market completely. If this occurs, we could see an increase in vacant properties in tourist and highly sought-after areas.
  • Increased Availability of Long-Term Rentals: The government aims to encourage more properties to enter the long-term rental market, potentially easing the housing shortage in some regions.

Things To Consider As A Landlord

These changes could significantly impact how you operate as a landlord or holiday let owner. If you rely on your properties as income, seeking financial advice from an expert could help you decide on the next best steps in line with these changes. Generally speaking, however, your next steps could look something like this:

  • Holiday Let Owners: Landlords with holiday lets should carefully assess the impact of the FHL scheme’s abolition on their business model. Exploring alternative tax strategies and potentially adjusting rental prices may become necessary – always consult with a financial advisor in these cases to ensure that you are well informed.
  • Traditional Buy-to-Let Landlords: The CGT reduction offers a small tax benefit when selling buy-to-let properties. However, other factors like rising interest rates and potential changes in tenant protections should also be considered.

While the landscape is changing, those looking to hold onto their properties in the coming months should ensure that they are prepared. By seeking expert advice, you can better understand the potential effects that tax and scheme changes could have on your properties in the coming months. It’s also important to ensure that you and your existing tenants are protected. Landlord insurance can provide additional financial support for claims or damage, ensuring that you aren’t left out of pocket when it matters most. Simply get in touch with Ashburnham Insurance for more information or your bespoke, personalised quote.

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