Key Takeaways from the Latest UK Budget for Landlords and Tenants

The UK’s recent Budget, unveiled by Chancellor Rachel Reeves, includes significant changes for the property market, especially for landlords and tenants. From increases in stamp duty to the introduction of the Renters’ Rights Bill, this Budget presents a mixed bag of impacts aimed at shaping the future of the rental sector. Here’s a breakdown of the key updates and how they might affect landlords and tenants alike.

1. Increase in Stamp Duty for Additional Properties

The stamp duty surcharge on additional properties has increased from 3% to 5%, making property purchases more costly for landlords, especially in the £250,001–£925,000 price bracket. Now, landlords face a total stamp duty rate of 10% on properties within this range. This added cost could discourage new buy-to-let investments, potentially leading to fewer rental properties on the market and driving rents higher due to limited availability. Landlords considering portfolio expansion should account for this additional cost in their financial planning.

Key Takeaway for Landlords: Be prepared for higher upfront costs when purchasing additional properties. This may be a good time to assess your long-term portfolio strategy in light of rising acquisition costs.

2. Capital Gains Tax (CGT) Rates Remain Steady

Contrary to some predictions, the Budget has kept the current CGT rates for selling rental properties unchanged. This decision offers stability for landlords considering sales, as they won’t face increased CGT liabilities. Maintaining the current rates could incentivise landlords to hold onto properties or time their sales carefully, potentially slowing down market turnover.

Key Takeaway for Landlords: While CGT rates haven’t changed, it’s wise to consider timing and financial planning for any potential property sales, as the market could shift with other Budget changes in play.

3. Inheritance Tax (IHT) Adjustments Impacting Estate Planning

The Budget freezes the IHT nil-rate band, effectively increasing tax pressure due to inflation. Additionally, pension funds will now be subject to IHT, which could affect landlords using pension funds in estate planning. These changes might prompt some landlords to reassess how they plan to pass down property assets to heirs, considering the higher IHT burden over time.

Key Takeaway for Landlords: Review your estate planning and consider consulting with a financial advisor to explore options that may mitigate increased inheritance tax liabilities.

4. Introduction of the Renters’ Rights Bill

Alongside the Budget, the government presented the Renters’ Rights Bill, introducing major reforms aimed at providing tenants with more security and flexibility. Key proposals include:

• Abolition of Section 21 ‘No-Fault’ Evictions: Landlords will need to provide valid reasons for evicting tenants, increasing tenant security.
• Introduction of Periodic Tenancies: All tenancies will transition to periodic agreements, offering tenants more flexibility.
• Regulation of Rent Increases: Rent increases will be capped at once per year, and tenants will have the right to challenge excessive increases through a tribunal.
• Prohibition of Discriminatory Practices: Discrimination against tenants with children or those receiving benefits will be banned, ensuring fairer access to housing.

These reforms mark a shift toward tenant-centric policies, giving tenants greater stability while imposing new compliance requirements on landlords.

It's important to note however, that this was first introduced to Parliament on 11th September 2024, and is currently under legislative review. If passed, the reforms are expected to become law by summer 2025. This timeline should allow landlords and tenants to prepare for the forthcoming changes.

Key Takeaway for Landlords and Tenants: Landlords should review their tenancy agreements and management practices to comply with these changes, while tenants can expect increased rights and stability in their rental arrangements.

5. Government Investment in Affordable Housing

To help address the housing shortage, the government has pledged £500 million toward the construction of 5,000 new affordable and social homes. This investment aims to relieve pressure on the rental market by increasing affordable housing options, a positive step for tenants struggling with high rental costs.

Key Takeaway for Tenants: Increased availability of affordable housing options could offer more choices and potentially help stabilize rental prices in the long term.

Conclusion: A Mixed Landscape for Landlords and Tenants

The 2024 Budget and associated legislative changes highlight a strong focus on tenant rights and housing affordability, introducing reforms that will require landlords to adapt their strategies. For tenants, the Renters’ Rights Bill promises enhanced protections, while landlords will need to navigate increased transaction costs and compliance requirements.

Next Steps for Landlords and Tenants:

• Landlords: It’s advisable to reassess your property management practices, especially around tenancy agreements and tax planning. Consult with a property tax advisor if needed to ensure compliance with the new regulations.
• Tenants: Familiarise yourself with the new rights under the Renters’ Rights Bill to better understand protections regarding tenancy security and rent increase challenges.

As these changes take effect, staying informed and proactive can help both landlords and tenants navigate the evolving landscape with confidence.

By staying informed about these updates and adjusting your strategies, you can make the most of this period of change, whether you’re renting or investing in property. For more detailed guidance on how these changes might impact your unique circumstances, feel free to reach out or schedule a consultation!