The 2024 Autumn Budget has been announced by the Labour Government.
In this article, you’ll find out exactly how these tax changes make it more expensive to own and sell rental properties, and how likely it is to impact property owners.
Key tax changes that will impact landlords:
- Lower rate of capital gains tax to increase from 10% to 18%.
- Higher rate of capital gains tax to increase from 20% to 24%.
- Residential property thresholds to remain unchanged.
- Stamp duty on second homes to increase from 3% to 5% in England and Northern Ireland.
- Increase on Employers’ National Insurance contributions.
1. Increases in Capital Gains Tax (CGT) on second homes
A key tax change in the Autumn Budget is the rise of capital gains tax on second homes. The lower rate will rise from 10% to 18%, while the higher rate will rise from 20% to 24%.
These increases will make it more expensive for landlords to sell their second properties such as buy-to-let properties.
For instance, let’s say a landlord sells a second property with a profit of £50,000 which falls into the higher rate:
- Under the previous 20% rate, property owners would pay £10,000 in CGT.
- Under the new 24% rate, property owners will now pay £12,000 in CGT.
The rates for capital gains tax on residential property remains unchanged.
What does this mean for property owners?
Property owners who may have been considering exiting the market may decide to now hold off, in hope for more favourable tax conditions in the future.
With the potential for higher taxes on profits, landlords may be discouraged from investing in more buy-to-let properties for the foreseeable.
Some landlords may need to rethink their strategies. Instead of selling properties to realise gains, they might look for ways to restructure their portfolios to minimise tax liabilities.
Click here to read how some landlords are tackling this challenge
2. Residential property stamp duty thresholds
The temporary cut to the stamp duty threshold – which was implemented in the 2022 mini budget – is set to expire at the end of March 2025.
This means the tax-free threshold for buying residential property will revert from its current level (£250,000) to its previous level (£125,000) from April 2025 onwards.
For example:
- Today: You buy a residential property for £200,000, you pay £0 in stamp duty.
- From April 2025: You buy a residential property for £200,000; you pay stamp duty on £75,000. This is because it will be above the soon-to-be limit of £125,000. The stamp duty for this residential property is 2% of £75,000, which is £1,500.
First-time buyers won’t pay stamp duty on the first £300,000, as long as the property is not more than £500,000.
So, first-time buyers are less affected by this change. But for most buyers, buying after April 2025 will mean paying more in stamp duty.