What does the Autumn Statement mean for PRS landlords?

November 25, 2022

In one of the most eagerly awaited fiscal updates for many a year, the Chancellor Jeremy Hunt – who only took on the role just over a month ago – set out the government’s tax and spending plans.

He had said before the address that some measures outlined in the Statement would make for difficult reading, but he insisted he was delivering a plan designed to tackle the cost-of-living crisis and rebuild the UK economy.

He needed to fill a huge fiscal black hole – in part down to Covid and Brexit, in part due to rampant inflation, but also due to the fallout from Liz Truss and Kwasi Kwarteng’s disastrous mini-Budget.

As expected, he achieved this mostly through tax rises and spending cuts to the tune of £55 billion.

But he also announced some measures that will be of interest to landlords – and not all of them good. Here we set out what the Statement means for those operating in the lettings sector.

Halving of CGT allowance

The Chancellor said he would more than halve the tax-free allowance for capital gains in 2023-24 from £12,300 to £6,000, before halving it again to £3,000 in 2024-25. He said this was in order to make the tax system fairer and restore the public finances.

However, landlords looking to sell their homes or exit the market completely will be hit hardest by this change, because capital gains tax is levied at a much higher rate for residential property sales.

The move could lead to landlords leaving the sector earlier to ensure they aren’t hit by the change, which could have an impact on rental supply.

Ben Beadle, chief executive of landlord trade body National Residential Landlords Association (NRLA), believes ‘these swingeing cuts to Capital Gains Tax allowances will dissuade investment for years to come’. He said it will discourage investment in new rental homes and drive up the cost of renting.

More tax for higher earners

In his speech to the Commons, Hunt also revealed that higher earners will begin paying the top rate of tax (45%) when they earn £125,140, a fall from the present rate of £150,000.

Consequently, more landlords could be dragged into the top paying tax bracket. This will then have an impact on the potential profits they can generate on their rental homes.

In other tax changes, the Chancellor announced that Inheritance Tax thresholds will be frozen for the next two years. This will leave hundreds of thousands of home owners subject to paying this tax.

Stamp duty cut to be time-limited

In one of Hunt’s more unexpected moves, he pledged to eventually reverse the stamp duty cuts which had been revealed in his predecessor’s mini-Budget. He said he will ‘sunset the measure’ from the end of March 2025. In effect, then, we have another stamp duty holiday on our hands.

Back in September, Kwarteng – who lasted only a matter of weeks as Chancellor - upped the nil rate threshold for stamp duty from £125,000 to £250,000. Meanwhile, the rate at which first-time buyers pay stamp duty on their first home was upped to £425,000 from £300,000 on purchases worth up to £625,000.

Shortly after Hunt’s address, the Treasury tweeted to confirm the move. “This is to help the jobs & firms that rely on the housing market through the current challenges, while strengthening the public finances,” it said.

The above were the main changes likely to affect landlords, but there were a number of other measures announced, including more funds for levelling up, the uprating of pensions and benefits in line with inflation, and an energy efficiency taskforce. These are all outlined in greater detail here

Here at Farrell Heyworth, we operate in the busy North West towns and villages of Garstang, Lancaster, Morecambe, Preston, Cleveleys, Barrow and Chorley. To find out how we can assist you on your lettings journey, please get in touch with us today.

We encourage all our customers to register with our My FH portal, which will give you access to the most up-to-date information; remotely and at your convenience.

You can also find out how much you could be charging on the local rental market by requesting a free and instant online valuation today.

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