How the Autumn Budget will Impact the Rental Market

The recent Autumn Budget announcement brings significant changes that could impact the UK rental market, with effects likely to influence property availability, rental prices, and landlord activity, here’s how:

Increase in Stamp Duty on Additional Properties

For those considering buying a property to rent, the increase in stamp duty surcharge for additional properties is a notable consideration having increased from 3% to now 5% (HM Revenue & Customs, 2024).  This will inevitably discourage new property purchases by landlords, particularly in high-cost areas and potentially result in fewer rental properties entering the market. A constrained supply may lead to higher rental prices, as fewer properties are available to meet demand​.

Stability in Capital Gains Tax Rates

Interestingly, the government chose not to increase CGT rates for residential property, which may provide some reassurance for landlords considering selling their properties (BBC News, 2024). However, despite being unchanged, CGT is still a significant cost when landlords do choose to sell, and consequently many may decide to retain properties rather than incur these expenses. Hopefully, this will mean reduced turnover of rental properties and continuous supply for applicants looking to secure a tenancy.

Changes to Inheritance Tax (IHT)

IHT thresholds have been frozen and from 2027, inherited pensions will be subject to IHT, with this in mind landlords with significant property assets should consider revising their estate planning strategies (Independent, 2024). These changes should primarily affect high-net-worth landlords; however, it could also affect tenants as it could result in higher rental prices in preferential areas if landlords choose to pass on the costs. Furthermore, the increased IHT obligations could mean a reduced pool of properties being transferred to the rental market.

Conclusion

For tenants, the reduction in available rental properties paired with the influx of costs to landlords can unfortunately only mean rent increases across the board. While this could be a great opportunity for existing landlords, it does make it more difficult for long term renters and applicants. If you are looking for a property and struggling, our advice would be to not give up, keep your eyes peeled and once a property that suits you comes up, apply fast! Rejection is no reflection on you but only the high level of demand and competition in the industry.

For landlords, the budget means finding savvier ways to manage the additional financial burdens and if needed, revision of their estate planning strategies.  

References:

BBC News (2024), Budget 2024: Key points at a glance. Available at: Budget 2024 summary: Key points from Rachel Reeves’s speech - BBC News [Accessed 2nd November 2024]

HM Revenue & Customs (2023), Increase to the higher rates on additional dwellings and to the single rate of tac on purchase by non-natural persons. Available at: Stamp Duty Land Tax — increase to the higher rates on additional dwellings and to the single rate of tax on purchases by non-natural persons - GOV.UK [Accessed 1st November 2024]

Independent (2024), What the inheritance tax rise in the Budget means for you. Available at: Budget 2024: What the inheritance tax rise means for you | The Independent [Accessed 1st November 2024]