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Spring Budget 2024: what do landlords need to know?

3-minute read

Houses of Parliament in London
Conor Shilling

Conor Shilling

31 January 2024

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Chancellor Jeremy Hunt will deliver a Budget on Wednesday 6 March 2024 alongside an economic and fiscal forecast from the Office for Budget Responsibility.

The upcoming Spring Budget is likely to be the last financial statement before the next general election, which must take place before the end of January 2025.

With rumours about an income tax cut, changes to inheritance tax, and a new 99 per cent mortgage scheme, here’s an overview of what landlords need to look out for in the Budget.

Could landlords benefit from pre-election tax cuts?

Ahead of the general election, it’s been rumoured that Jeremy Hunt could use the Budget to announce some tax cuts.

However, despite a drop in government borrowing meaning the chancellor has more money to spend, some reports have suggested that there’s less scope for Budget tax cuts than initially expected.

The International Monetary Fund (IMF) has called on the chancellor to use the cash he has available to repair public spending after the pandemic and Ukraine war instead of tax cuts.

However, Jeremy Hunt told the BBC that he still wants to “lighten the tax burden”.

Some reports suggest a two per cent cut to income tax is being considered, while others point towards a one per cent cut.

A lower income tax rate would represent positive news for many taxpayers who have suffered from frozen tax thresholds since 2021.

Analysis by investment platform AJ Bell suggests that a two per cent cut to income tax would generate annual savings of:

  • £448 for someone earning £35,000 a year
  • £948 for someone earning £60,000 a year

It’s also been rumoured that there could be further cuts to National Insurance contributions, following changes announced in the 2023 Autumn Statement.

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Changes to inheritance tax being considered

Another rumour in recent weeks is that the government is considering reforming or even scrapping inheritance tax.

At the moment, inheritance tax is charged at 40 per cent on anything worth over £325,000 left to beneficiaries of an estate. However, analysis shows that only four per cent of estates were liable for inheritance tax in the 2020-21 tax year.

It has been reported that there’s some scepticism about reforming inheritance tax during a cost of living crisis when it affects so few people.

Those in favour of inheritance tax changes will point to rates and thresholds that haven’t been changed for years while average house prices have increased rapidly.

Landlords planning for their future will be interested to see what happens with inheritance tax as any changes announced as part of the Spring Budget could inform their decisions about buying and selling property, or incorporating their portfolio.

New mortgage scheme to help first-time buyers?

Another strong Budget rumour is that the government is considering launching a scheme that allows people to buy a property with a one per cent deposit.

The average deposit for buying a property is around 20 per cent of the purchase price, so a scheme like this could make it much easier for first-time buyers to get on the housing ladder.

But how could this impact the rental market? A rise in first-time buyers could mean fewer tenants and less competition for rental properties.

More incentives to buy property could also cause average house prices to rise and a more competitive market for landlords looking to expand their portfolios.

Calls for stamp duty surcharge to be scrapped

When property owners buy a second home, they’re required to pay an extra three per cent in stamp duty. This means that someone buying a second property for £300,000 pays £9,000 more in tax than someone buying a property as their main home for the same price.

Estate agency trade body Propertymark has called on the chancellor to suspend the stamp duty surcharge for one year to encourage buy-to-let investment and reduce the shortage of rental housing.

The National Residential Landlords Association (NRLA) went one step further, asking for the extra three per cent stamp duty to be completely scrapped. It referenced Capital Economics research that suggests removing the extra stamp duty would lead to almost 900,000 new rental homes across the UK.

The NRLA said the government would also benefit from an estimated £10 billion in additional income tax and corporation tax.

Government urged to reverse Section 24

Propertymark has called on the government to reverse Section 24 tax changes, which have contributed to higher average rents in recent years.

Since 2020, landlords have only been able to claim back mortgage interest costs up to the basic rate of income tax (20 per cent). Before the changes were phased in from 2017, landlords could deduct all of their mortgage interest from their rental income and pay tax solely on their profits.

Propertymark said reversing this tax change would encourage more investment in the rental market and incentivise landlords to make improvements to their properties.

The impact of Section 24 remains a significant challenge for landlords. Our 2022 research found that a third (33 per cent) feel their properties are no longer as profitable due to the tax changes.

What would you like to see in the Spring Budget? Let us know in the comments below.

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Conor Shilling

Written by

Conor Shilling

Conor Shilling is a Copywriter at Simply Business with over two years’ experience in the insurance industry. A trained journalist, Conor has worked as a professional writer for 10 years. His previous experience includes writing for several leading online property trade publications. Conor specialises in the buy-to-let market, landlords, and small business finance.

We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer

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