On 30th October, Rachel Reeves will deliver her first Budget since the Labour Party was elected to government. There has been much speculation about the potential contents of the Budget, with Sir Keir Starmer warning of pain to come in the face of a ‘black hole’ in the nation’s finances.
Whether or not this amounts to expectation management remains to be seen, but it does seem likely that in general taxes will increase; the question is which ones.
The Labour Party committed to not increase Income Tax, National Insurance or VAT in their manifesto. However, the government has said that they need to raise funds in some capacity. Landlords, who have in recent years been targeted with various tax increases, are concerned that some of that strain will fall on them.
We have already started to see a reaction to these concerns with reports of an increase in sale listings for rental properties in anticipation of the Budget.
Given the constraints set out in the Labour Party’s manifesto, how could landlords be impacted?
Capital Gains Tax (CGT)
The Labour Party did not make any manifesto commitments in relation to CGT, and so it is widely expected that the rate of CGT will increase, possibly from the date of the Budget. Landlords may decide to realise any capital appreciation on their properties now whilst the top CGT rate on residential property is 24%.
Stamp Duty Land Tax (SDLT)
SDLT is charged on the purchase of a property and is already set to increase from 31 March 2025 when the temporary removal of the 2% band will come to an end. To find out more about this and how it may impact you, you can read our analysis here.
Inheritance Tax (IHT)
The Labour Party could increase IHT from the current rate of 40%, or restrict some of the available exemptions, such as the existing “7 year” rule whereby a lifetime gift to another individual can be exempt from IHT if it is survived by 7 years. Some landlords will be considering a gift of their rental properties, perhaps to their children, whilst this exemption is available. In this scenario, other taxes (such as CGT, Income Tax and SDLT) need to be considered carefully alongside IHT.
National Insurance (NI)
Although there is a manifesto commitment not to raise NI for employees, it could be extended to profits from rental businesses.
Council Tax
The government may be considering a reform of Council Tax, which in England is still based on valuations from 1991, although this would not be easy to implement.
Furnished Holiday Lets (FHLs)
The previous government announced that the FHL regime will be withdrawn from 6 April 2025, and it is unlikely that the Labour Party will reverse this policy. Read about the changes to the FHL scheme here.
Non-dom reforms
Some landlords will be impacted by the proposed non-dom reforms. For example, the proposed associated IHT reforms and the removal of the remittance basis of taxation could impact non-dom landlords with foreign letting businesses. Further detail on these reforms should be provided at the Budget. Learn more about the changes to the non-dom regime, who benefits and who doesn’t here.
To find out how you could personally be impacted, get in touch with Sam Dewes.
We’d love to hear from you. To book an appointment or to find out more about our services:
