The chancellor, Rachel Reeves, delivered her first budget of the new Labour Government with a number of measures that directly affects landlords. Whilst we await the full Budget Report there were a number of headline announcements. Here, we provide a summary of these and our view on the impact on landlords.
Capital Gains Tax (CGT)
Widely expected increases in the CGT rate on second homes proved to be unfounded as The Chancellor announced that the rates of CGT on second homes would stay at 18% / 24%. Some good news therefore for landlords who own their property in their personal names who had been fearing that the rates might have been increased in line with income tax rates of 20%/40% and 45%.
For landlords holding property in a limited company who exit via a share sale the CGT rate will be increasing to 18% / 24% so some alignment there between the two main ways in which landlords now purchase rental property, with regard to CGT.
Inheritance Tax (IHT)
The thresholds for IHT were all held at the current rates so no change that affects landlords. Once again much was made of speculation that The Chancellor was looking at increases in IHT which did not materialise. Whilst there was an announcement on taxing of inherited pensions, this does not directly impact landlords.
Stamp Duty Land Tax (SDLT)
The higher rate surcharge of 3% will increase to 5% from tomorrow. This currently applies to all purchases of second homes and a limited company. This is by far the biggest increase in costs for landlords. We await further details on transactions that are already in motion and would expect some transitional relief for purchases that are already agreed.
A full impact assessment for landlords will be published in due course once the full Budget Report is released but so far, the only real change has been on SDLT. On a purchase of a £200,000 property the higher rate SDLT charge would increase from £6,000 to £10,000. No doubt this will have some impact on landlords return on investment and will need to be factored in when making purchases.
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