Budget 2024 for landlords: what you need to know

On 6th March 2024, Chancellor Jeremy Hunt unveiled his last budget before the next general election. We have published a detailed summary of his announcements here. However, the Budget was striking because of the number of measures that will affect the buy-to-let sector. In this post we take a look at Budget 2024 for landlords and explain what you need to know.

Bad news for holiday let owners

Perhaps the most eye-catching changes affect owners of furnished holiday lets (FHLs). In recent years it has become more popular to invest in holiday lets. This is partly because, during the pandemic, large numbers of people chose UK vacations rather than foreign holidays. It is also because there were tax advantages.

Currently, landlords of furnished holiday lets can deduct the cost of their mortgage interest payments from rental income. This is in stark contrast to landlords of normal private rental properties, who lost this perk several years ago. FHL landlords also benefit from certain capital allowances (such as on furniture), along with CGT relief for traders.

In the Budget, the Chancellor announced he would scrap the FHL scheme. Instead, FHL owners will be subject to the same tax rules as landlords who let out properties to longer-term tenants. The new rules will be in place from April 2025.

Good news about Capital Gains Tax?

It’s likely that Jeremy Hunt scrapped the FHL tax regime to encourage those landlords to sell up. Given the current housing shortage, he wants to see more properties available for first-time buyers and longer-term tenants.

Another Budget 2024 measure seems designed to stimulate property sales. From April 2024, the higher rate of Capital Gains Tax on Property will drop from 28% to 24%. In theory, this means higher-rate taxpaying landlords will pay less on their property sales. However, it’s worth noting that the CGT personal tax-free allowance drops from £6,000 to £3,000 in April 2024. Additionally, the Stamp Duty surcharge on properties that aren’t your main residence remains in place.

Bad news for portfolio builders?

The Chancellor also announced a change that will affect landlords seeking to build up their portfolio. Currently, Multiple Dwellings Relief (MDR) offers a Stamp Duty discount to people buying several properties in a single transaction. MDR was designed to stimulate investment in the private residential rental sector, but the Chancellor claimed it had not worked. Instead, he said it is ‘regularly abused’.

Budget 2024 for landlords with non-domiciled status

Budget 2024 unveiled a major shake-up of the non-domiciled tax rules. After four years after becoming UK tax resident, people with non-domiciled status will be required to pay tax on foreign income and gains. As a result, these landlords with rental property overseas will need to pay UK tax on their earnings.

A word about the Renters Reform Bill

There is further uncertainty for landlords in relation to the Renters Reform Bill. This is currently going through parliament, but it needs to pass into law before the next general election. If it doesn’t, the Bill will fail.

Current media reports suggest that some MPs – particularly those opposed to the abolition Section 21 ‘no fault’ evictions – are trying to ‘sabotage’ the Bill. While the Levelling Up Secretary Michael Gove has pledged to pass the Bill before the end of this Parliament, each passing day throws doubt on its future. We’ll be keeping a close eye on the passage of the Bill and will let you know if it gets amended or fails to become law.

Budget 2024 for landlords – a summary

Budget 2024 didn’t contain much good news for landlords. Owners of furnished holiday lets are going to lose significant tax breaks. Higher-rate taxpaying landlords who want to sell their properties will see a CGT cut, but that’s offset by the recent decline in the CGT personal allowance. As recently as 2022/23 this stood at £12,300. From April 2024 it will only be £3,000.

The Budget also had bad news for landlords wanting to buy multiple properties at once. They’ll soon have pay full Stamp Duty when Multiple Dwellings Relief is scrapped. Beyond the Budget, there’s still uncertainty over the Renters Reform Bill. Will Section 21 stay, or will it go? Without knowing for sure, it makes it much harder for landlords to plan for the future – and that can’t be healthy for the private rental sector as a whole.