How Does the Autumn Budget Affect Landlords?

The recently released Autumn Budget presents the Labour government’s economic outlook and policy plans for the next five years, with significant updates affecting property owners and investors. Here’s what landlords need to know.

1. Increase in the Stamp Duty Land Tax (SDLT) Surcharge

One of the major announcements in the budget is the increase in the Stamp Duty Land Tax (SDLT) surcharge for second and additional properties. Previously, this surcharge was set at 3%, but as of October 31, 2024, it has risen to 5%.

This increase impacts anyone in the process of purchasing a second property, including those close to finalizing their purchases. For example, if a purchase closes after October 30, the new 5% surcharge applies, which could mean a significant additional cost.

This surcharge also affects married couples differently than some might expect. Even if only one spouse currently owns a property, the couple must still pay the 5% surcharge when buying their first property together. This policy could impact many more buyers, especially couples seeking a joint investment property.

2. Capital Gains Tax (CGT) Rates Remain for Residential Property Sales

In some positive news for landlords, the Capital Gains Tax (CGT) rates for residential property sales will remain at 18% for standard rate taxpayers and 24% for higher rate taxpayers. This is a relief for those planning to sell rental properties, as the tax on these specific gains won’t see an increase.

However, this relief is not universal.

3. Regular Capital Gains Tax Rates Are Increasing

The CGT rates on non-residential assets are increasing significantly. The standard rate will rise from 10% to 18%, and the higher rate will go up from 20% to 28%. For landlords who invest through Special Purpose Vehicles (SPVs)—which may own non-residential property—this change represents a notable increase in potential CGT liabilities when selling shares in an SPV.

These higher CGT rates could alter business strategies for property investors, especially those who were relying on SPV structures to facilitate easier sales or exits from investments.

4. Repeal of the Furnished Holiday Lettings (FHL) Regime

Another substantial change, announced earlier this year on July 29, is the abolition of the Furnished Holiday Lettings (FHL) regime as of April 6, 2025. This will eliminate the tax advantages that FHL properties currently enjoy, notably impacting landlords who rely on these benefits for short-term rentals.

A primary concern for FHL investors will be the restricted loan interest deduction rules. Under the current FHL regime, interest on loans for FHL properties can be deducted, but with the regime’s repeal, interest deduction will likely be more limited. This change may significantly impact profitability, especially for those with substantial financing costs.

What These Changes Mean for You

These policy changes may prompt landlords to review their portfolios and investment strategies to manage higher upfront costs and potential tax increases on disposals. The increased SDLT and changes to CGT rates may affect both immediate cash flow and long-term returns, particularly for those actively buying, selling, or refinancing properties.

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