The proverbial dust has now settled from Rachel Reeves’ Autumn Budget, making it a good time to analyse the key announcements and their impact on buy to let (BTL) on a more granular level.
Especially those that are likely to impact landlords’ immediate strategy, and of course what all of this implies for landlords and the wider private rented sector (PRS) longer term.
So, has the Autumn Budget actually offered some positive assurance for landlords?
Coming as a relief to landlords was the surprise announcement of capital gains tax (CGT) increasing, but the rate on residential properties not actually changing. Similarly, there were no changes to inheritance tax rates, which will come as a relief to many landlords.
Stamp duty hike
Most post-Budget conversation among lenders, brokerages, and landlords, however, have centred around Reeves’ declaration that anyone who plans to buy a BTL or second home will be affected by a 5% stamp duty surcharge, a two percentage point increase, effective almost immediately.
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Anecdotally, we have not seen this impact purchases or existing chains. However, we accept that there is bias with our particular entrepreneurial client demographic, who are much more likely to go back to the vendor in an attempt to negotiate the additional levy off of the agreed purchase price, or at least meet somewhere in the middle, rather than pull out of what is perceived as an otherwise robust investment at the ‘eleventh hour’.
Of course, looking ahead, the hike in stamp duty could discourage some new landlords from investing in their first BTL at this time, or potentially discourage a portion of existing landlords from aggressively expanding their portfolios. Indeed, for those landlords still considering the incorporation of their portfolio currently held in personal names, this additional tax burden to execute may create some reticence for those that would not benefit from Section 162 relief.
However, should the supply of properties within the PRS continue to fall behind demand for affordable housing stock, then this effective net reduction in rental properties will undoubtedly result in further rent increases. This will result in higher-yielding investments for committed landlords.
Indeed, as the National Residential Landlords Association (NRLA) stated: “The Chancellor has failed to heed the warnings of the Institute for Fiscal Studies that higher taxes on the rental market lead only to rents going up.”
The nationwide shortfall in housing stock is real, very real. According to Zoopla, this has led to an average of 21 prospective tenants competing for each available rental property on the market, and a scarcely comprehensible £1.74bn spent by local housing in 2022/23 to provide temporary accommodation.
There is no denying that, overall, it was a disappointing Budget for many, and the government needs to be incredibly careful as the wider policy needs to recognise that the PRS houses many of society’s most vulnerable.
However, despite the noise, there are many reasons for landlords to see the Autumn Budget, and indeed the longer-term economic vista, as very much net positive.
