This article was first published on Property Week
Chancellor Rachel Reeves’ Budget on 30 October demonstrated the government’s desire to
address the affordable housing crisis in the UK by announcing new measures to boost
housebuilding.
The £5bn investment announced by the chancellor aimed to kickstart the biggest increase in
social and affordable housebuilding in a generation, helping to build 1.5 million homes during
this parliament and tackle homelessness.
It is estimated that more than 4.6 million homes in England alone are provided by the private
rented sector. The importance of this sector to the overall provision of housing should not be
underestimated. However, a number of punitive measures against landlords have been
introduced in recent years and this latest Budget is no exception.
The chancellor announced that the stamp duty land tax (SDLT) surcharge of 3% on
additional properties would be increased to 5% with immediate effect. Private landlords were
already affected by the surcharge and an increase in the rate could discourage potential
landlords from entering the sector at all. Those landlords with existing property portfolios
might be discouraged from investing further and from expanding their rental portfolios.
This could have the effect of reducing the number of rental properties available, with the
knock-on effect of increased demand for the more limited supply. This will inevitably lead to
higher rents and less affordability, which seems contradictory to the government’s plans to
increase the supply of affordable housing in the long run.
Some landlords will already have been affected by the withdrawal of the multiple-dwellings
relief, which reduced the overall rate of SDLT if several properties were purchased at the
same time or in a linked transaction.
While a purchase of six or more residential properties can qualify for the commercial rates of
SDLT, which are generally lower, not all landlords are in a position to take advantage of this.
Private landlords are also affected by capital gains tax (CGT) when they sell a property. The
chancellor did not change CGT on residential property when she raised it on other capital
transactions, from 10% to 18% at the lower rate, and from 20% to 24% at the higher rate.
The CGT rate was already at those levels for residential property (albeit the top rate was
reduced from 28% to 24% last year), so that is one piece of good news for landlords.
A taxing topic
There was further bad news for property owners in that the freeze on the inheritance tax
threshold has been extended for an additional two years up to 2030. If property prices
continue to rise, this will push more people into the inheritance tax net.
The proposed changes to business property relief should not adversely affect private
landlords as the relief does not apply to investment assets.
Add these measures to the already unpopular Section 24 introduced in the Finance Act 2015
(which restricts the amount of mortgage interest that can be offset against rental income for
tax purposes) and the abolition of the favourable regime for furnished holiday lettings, and it
seems that pain for landlords shows no sign of abating.
As previously mentioned, with the private rented sector estimated to provide over 4.6 million
homes in England alone, it is important that the sector is supported if landlords are to be
encouraged to stay in this market and increase their investment, rather than liquidating their
portfolios and investing in other sectors. Without this support, the government’s efforts to
tackle the housing crisis may fall flat.
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