Labour’s upcoming Budget and what it means for property investors

How will the Budget reshape the private rental sector?

As the UK anticipates the release of the first Budget of this Labour government, landlords are paying close attention to potential policy shifts that could significantly impact the housing market. Understanding the likely proposals and preparing for them will be crucial for property investors looking to navigate the changing landscape.

One of the key areas of focus in the impending Budget is expected to be property taxation. Whilst we don’t know yet what these changes will be, it is unlikely that they will mean reduced taxation.

There is wide speculation around an increase in the Capital Gains Tax (CGT) rates when disposing of UK property. Labour have signalled that they may align CGT rates more closely with income tax rates, particularly for higher earners. Currently, CGT on residential property is set at 18% for basic-rate taxpayers and 24% for higher-rate taxpayers (10% and 20% for non-residential properties – rates correct as of today, 2nd October 2024), but this could rise significantly. For property investors, this means that selling properties could become more expensive, reducing the incentive to offload assets for profit. Those with large portfolios or planning to exit the market might need to rethink their strategies, potentially holding onto properties longer to avoid the higher tax hit.

Additionally, there is the the anticipated abolition of the Furnished Holiday Lets (FHL) regime, which is expected to come into effect from 5th April 2025. Areas which we expect to be impacted by this change are the relief for Capital Allowances, income from FHL ceasing to be treated as pensionable income, disappearance of relief on some disposal of FHL properties. This may influence the timing of any disposal you are considering.

Other anticipated changes to the rental market are: potentially higher energy efficiency requirements, enhanced safety measures, and mandatory long-term tenancies, all of which could involve additional upfront costs for landlords.

What next?

For landlords, the coming Budget could mark a period of transition and adjustment. While some might choose to sell off properties, others may look to restructure their portfolios or adapt to new rules in order to remain profitable. By staying informed about the changes and seeking professional advice where needed, property investors can better position themselves to handle the challenges posed by the new regulations, while continuing to meet the demand for quality rental housing in the UK.

We shall be monitoring the changes closely and are available to discuss any query you may have regarding your specific circumstances.

Contact us now to discuss your specific requirements

The information contained in this article is believed to be correct at the time of publication. The content of this article is intended to be a brief summary of the principal points of the legislation or proposed legislation only, and it is provided for general guidance only. It may not take into account subsequent changes in the law and of necessity it omits much detail. Taxation is a complicated subject and is subject to change. You should only rely on advice prepared specifically for you. Neither the writer nor Landlords Tax Services Ltd can be held liable for any loss arising from any act or omission by you as a result of your understanding of this article. If the subject matter is of interest you should contact us to see if there is a relevant update, and to take professional advice which takes into account your circumstances.