This year, there are two changes for landlords to know about.
1. The Stamp Duty Land Tax (SDLT) zero-rated threshold is reducing
This applies all buyers in England and Northern Ireland - except first-time buyers, who have their own purchase tax relief.
In September 2022, the zero-rate threshold for ‘standard’ SDLT was increased from £125,000 to £250,000, saving buyers £2,500. But this is dropping back to £125,000 from 1st April, slightly ahead of the new tax year.
And it’s important to know that the additional rate for buying any property after you own one increased from 3% to 5% on 31st October last year.
This is a surcharge on top of the ‘standard’ rate, and it applies to the whole purchase price - there is no zero-rated allowance.
For example, if you were completing on a Buy to Let property worth £280,000 from 1st April, your SDLT calculation would be:
Standard rate:
First £125,000 – zero-rated
Next £125,000 x 2% = £2,500
Final £30,000 x 5% = £1,500
Total = £4,000
Additional rate:
£280,000 x 5% = £14,000
Total SDLT = £18,000
Note that the Additional Dwelling Supplement in Scotland, which applies to the whole purchase price, was increased from 6% to 8% for all purchases from 5th December 2024, and the higher rate of Land Transaction Tax in Wales was also increased by 1% from 11th December.
2. Furnished holiday let relief is being withdrawn
Currently, furnished holiday lets (FHLs) are treated as a business for tax purposes. The relief available includes being able to:
- Deduct the full cost of mortgage interest from rental income
- Benefit from a reduced CGT rate of 10%
But from 6th April, the FHL relief will no longer apply. Expenses that could previously be deducted are now a 20% tax credit, meaning landlords in the higher-rate band will pay more tax. This brings holiday lets more into line with standard residential lets.
For more information, see the government website.
Changes made in 2024/5 for your upcoming tax return
For your next self-assessment return - which must be completed and any tax due paid before 31st January 2026 - you should be aware of the following changes that took effect within the past tax year:
- Capital Gains Tax: The personal allowance, which dropped from £12,300 to £6,000 in 2023/4, was reduced again, to £3,000. However, the good news is that the higher rate of CGT was brought down from 28% to 24%.
- 'Class 4' NI: The level of contributions paid on self-employed profits of between £12,570 and £50,270 was reduced from 9% to 6%.
As property investment can be a particularly complicated area of tax, it’s well worth working with a property tax specialist, who can help ensure you meet your financial obligations while operating your property business in a tax-efficient way.
Mortgage rates should fall further this year.
Even though inflation is currently at 2.8% and expected to increase to over 3% in the summer, most economists believe interest rates will fall this year.
A poll by Reuters of 61 economists correctly predicted that the Bank of England would hold the base rate in March, but most are expecting cuts in May, August and November.
And when the base rate comes down, lenders usually reduce mortgage interest rates.
• Moneyfacts data shows that fixed rates fell in March by just over 0.1% - their biggest fall in almost six months
• Average mortgage rates are forecast to fall by around another 0.6% by the end of the year.
One important thing to note is that many lenders are increasing their fees on fixed-rate deals, so make sure you discuss the full cost of any new deal with a mortgage broker before deciding whether to move ahead.
Renters’ Rights Bill: moving closer to Royal Assent
The RRB had its second reading in the House of Lords in early February and the Committee stage is scheduled to begin just after Easter.
The third reading is expected to take place sometime in May, meaning the Bill is likely to pass around the start of July.
Given that the rental sector will need time to prepare for implementation of many of the measures, so it’s unlikely that the more significant ones – including the scrapping of section 21 and the introduction of a new tenancy agreement – will come into force before September this year.
Meanwhile, tightening the anti-discrimination rules and giving tenants the right to request a pet could be introduced much sooner.
Rent controls coming to an end in Scotland
Scotland has had temporary rent controls in place for the past year, which were brought in to aid transition from the 0% rent growth cap introduced under emergency legislation in September 2022. These controls will now be scrapped on 31st March.
This means that from 1st April, if a tenant challenges a rent increase notice by making an appeal to the rent officer or First-Tier Tribunal, their rent will be set at the current open market rental value - even if that’s higher than the amount proposed by the landlord.
While the removal of rent cap restrictions is good news for landlords, there is still some concern in the industry that the hike in the ADS purchase tax in December, from 6% to 8%, will deter some landlords from making much-needed new investment in the PRS.
We’d suggest landlords view this extra initial capital outlay in the context of the lifetime of the investment.
For instance, although it means paying an extra £5,000 in tax on a £250,000 purchase, if you’re planning to hold the property for 15 years, it’s only cost you £333 more a year, which is less than £30 a month.
With rents rising and the capital value increasing, that additional £5,000 in up-front costs shouldn’t stop you buying a rental property that will deliver good returns over time.
We have local lettings experts in your area ready to support your investment with our fully managed plan for landlords. Find out how we can help you today.
The Your Move Content Marketing Team
