What Does the October Budget Mean for Landlords?

As a letting agency, My Landlord Cares understands that government budgets can significantly impact the property rental market. With the announcement of the UK’s October Budget, landlords are keen to understand how new economic measures will affect their property investments and rental income.

In this blog, we will explore the key takeaways from the budget and what landlords need to be aware of in 2024 and beyond.

One of the biggest concerns for landlords is the rising interest rates. The Bank of England has raised rates multiple times over the past year to curb inflation, which has increased the cost of borrowing. Higher interest rates affect mortgage payments, especially for landlords with buy-to-let mortgages.

What the Budget Means for Landlords:

• No Mortgage Interest Relief Reinstatement: The October Budget did not bring back full mortgage interest relief for landlords. The phased-out relief system continues, meaning landlords can only offset 20% of their mortgage interest costs against their tax bill. This could squeeze profit margins, particularly for landlords with higher loan-to-value mortgages.
• Interest Rate Hikes: With interest rates expected to stay elevated in 2024, landlords may need to reassess their financing strategies. Refinancing to longer fixed-rate mortgages might be a prudent option to avoid further increases in mortgage costs.

The government has previously hinted at possible changes to Capital Gains Tax as part of its tax reform agenda. Although the October Budget did not make any drastic alterations to CGT, it’s an area that landlords should monitor.

What Landlords Should Consider:

• No Major CGT Hikes: There were no significant changes to CGT in this budget, but landlords selling properties should continue to plan for the current CGT rates: 18% for basic-rate taxpayers and 28% for higher-rate taxpayers on residential property sales.
• Tax Planning Opportunities: Landlords may want to explore using allowances or distributing sales across tax years to reduce their CGT liability. Consulting with a financial advisor can help identify the most tax-efficient strategies.

Stamp Duty continues to be a key issue for landlords when purchasing new properties. Recent budgets have introduced a range of SDLT measures, from surcharges on additional homes to temporary reductions during the pandemic.

Impact of the October Budget:

• No Changes to SDLT Surcharges: The 3% SDLT surcharge on additional properties remains in place. This continues to add an extra cost for landlords looking to expand their portfolios.
• First-Time Buyer Focus: The Budget included incentives for first-time buyers and those entering the property ladder, but nothing specific for landlords. As a result, landlords may face increased competition from new buyers, which could drive property prices higher.

One area of the October Budget that could directly affect landlords is the government’s ongoing push for energy efficiency in housing. With rising energy costs and the climate agenda in full swing, the Budget laid out additional support for improving energy efficiency in homes.

How This Affects Landlords:

• New Energy Efficiency Standards: The Budget reaffirmed the government’s commitment to improving the energy efficiency of UK homes. For landlords, this means ensuring that properties meet the upcoming EPC (Energy Performance Certificate) minimum standards. By 2025, all rental properties will need to achieve at least an EPC rating of “C” or higher.
• Grants and Incentives: There are additional grants available to help homeowners and landlords make their properties more energy-efficient. Investing in upgrades like insulation, double glazing, and energy-efficient heating systems now could help avoid future penalties and attract environmentally-conscious tenants.

Housing supply and affordability were central themes of the Budget, with the government reaffirming its commitment to building more homes. For landlords, these policies may affect the overall rental market dynamics.

What to Watch:

• Affordable Housing Push: The government announced funding to build more affordable homes. While this is positive news for renters, landlords could see increased competition if a larger supply of rental properties hits the market.
• Planning Reforms: The Budget also promised planning reforms to speed up housing developments. Although this could increase the supply of homes, landlords in high-demand areas may need to adjust rental prices as new properties come on stream.

The Budget touched upon the ongoing reforms to renters’ rights, which aim to strengthen protections for tenants. Although many of these changes were already in motion before the Budget, landlords need to be prepared for the impact of new tenancy laws.

What Landlords Need to Know:

• End of Section 21 ‘No-Fault’ Evictions: The Renters’ Reform Bill, which was discussed alongside the Budget, plans to end Section 21 ‘no-fault’ evictions. This means landlords will only be able to evict tenants under specific circumstances, such as rent arrears or property damage.
• New Ombudsman Service: A nationwide landlord registry and ombudsman service will likely become mandatory, ensuring higher standards of accountability across the private rented sector.
• Longer Tenancy Terms: As part of the reform, longer tenancies could become the norm, which may provide more security for both landlords and tenants but reduce flexibility for landlords who want to regain possession of their properties.

Though the October Budget didn’t introduce sweeping tax changes, there are always possibilities of future adjustments, especially with an election looming. Landlords should be prepared for further reforms in subsequent budgets.

What to Anticipate:

• Possible CGT Changes: Future budgets could still bring changes to CGT, including lowering allowances or increasing rates, which may impact landlords selling properties.
• Increased Property Taxes: With pressure on public finances, there could be future tax rises targeting property investors, especially those with multiple properties or those operating through limited companies.

The October Budget may not have brought significant immediate changes for landlords, but it reaffirmed several trends that will affect the sector in the coming years. Higher interest rates, stricter energy efficiency standards, and tenancy reforms are all issues landlords must keep in mind moving forward.

As a landlord, planning ahead and staying informed is critical to maintaining a profitable property portfolio. At My Landlord Cares, we offer services that provide peace of mind for landlords. From handling tenant communication to ensuring properties meet new regulatory standards, we work to make the experience of being a landlord smoother.

If you have any concerns about how the October Budget might affect your investments, get in touch with our team today. We’re here to help landlords navigate the ever-changing property market with ease.