Luke McMath, partner in Blandy & Blandy’s residential property team, looks at the impact of the Budget on residential property landlords and investors.
Chancellor Rachel Reeves delivered mixed news for residential property landlords and investors in the Budget on October 30.
Capital Gains Tax
Capital Gains Tax (CGT) is payable on the profits from the sale of any capital assets, which may include additional properties, business assets, shares and certain personal possessions (not cars) worth £6,000 or more.
Individuals are currently exempt from paying Capital Gains Tax on the first £3,000 of profits, or £1,500 if a trust is involved. Any gains above those thresholds may be subject to CGT.
CGT rates are different for different classes of assets. Whilst CGT has been increased for assets such as shares, carried interest and other assets, (see our blog article, ‘What is Capital Gains Tax, How is Capital Gains Tax Calculated and What is Changing?‘), there will be no changes to CGT for residential property. This will be welcome news for landlords and investors, with there having been a great deal of speculation otherwise in the lead up to the Budget.
As such, if you pay Income Tax at the higher rate, from October 30, 2024, when changes to CGT take effect, you will continue to pay 24 per cent on your gains from residential property. If you pay basic rate Income Tax the rate will depend on the size of your gain. Please see our earlier blog article for information on how to calculate this.
If the total gain is within the basic Income Tax band (currently £12,571 to £50,270) you will pay 18 per cent on your gains. For any amount above the basic Income Tax threshold, you will pay 24 per cent on gains.
Stamp Duty Land Tax
The Stamp Duty Land Tax (SDLT) surcharge on purchases of additional residential properties (those that are not the owner’s home) by individuals and companies will rise from three per cent to five per cent for transactions with an effective date (usually the date of completion) on or after October 31, 2024 unless contracts have already been exchanged.
According to HMRC, this policy measure is: “expected to disincentivise the acquisition of second homes and buy-to-let properties, freeing up housing stock for main home and first-time buyers.”
This financial year, the change is forecast to raise an additional £115 million and an additional £310m per year by 2029/30.
| Residential Property Purchase Price (£) | SDLT charge for standard home buyer until 31 March 2025 | SDLT charge for buyer of additional properties, including the surcharge, prior to 31 October 2024 | SDLT charge for buyer of additional properties, including the surcharge, on and after 31 October 2024 until 31 March 2025. |
| Up to £250,000 | 0% | 3% | 5% |
| The portion from £250,001 to £925,000 | 5% | 8% | 10% |
| The portion from £925,001 to £1.5 million | 10% | 13% | 15% |
| The portion above £1.5 million | 12% | 15% | 17% |
The budget has also brought in an increase in SDLT by not extending the current SDLT holiday for values between £125,000 and £250,000 such that SDLT will be charged at two per cent (plus additional property surcharge) between £125,001 to £250,000.
Seek Expert Advice on Capital Gains Tax and Stamp Duty Land Tax
It is always important to seek expert advice, including in relation to Capital Gains Tax or Stamp Duty Land Tax. Please contact our Residential Property team to find out more.
For further information or legal advice, please visit www.blandy.co.uk.
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