Chancellor Rachel Reeves in her first budget announces a series of tax increases that will impact landlords.

Stamp Duty

Stamp Duty on buy-to-let properties and second homes was raised from 3% to 5%. The new measure is now in effect and is seen by many in the Private Rented Sector as a major blow to investment and exacerbate the housing supply crisis.

The briefing notes following the Budget said: “The government is supporting first-time and main home buyers by increasing the Higher Rates for Additional Dwellings of Stamp Duty Land Tax.

“These higher rates apply to purchases of second homes, buy-to-let residential properties and companies purchasing residential property and the increase will provide those looking to move home or purchase their first property with a comparative advantage over those purchasing additional property.

“This is expected to result in 130,000 additional transactions over the next five years by first-time buyers and other people buying a primary residence. Those who exchanged contracts prior to 31 October 2024 are not affected by this rate increase.”

Lucian Cook, head of residential research at Savills, commented: “Any relief buy-to-let landlords and second homeowners may have felt from seeing their exposure to capital gains tax unchanged will have been very short-lived given an increase in the SDLT surcharge.

“The risk is that it further constrains the supply of private rented accommodation, keeping upward pressure on rents. New buy-to-let investors will be very thin on the ground, and even existing larger, wealthier, landlords, will think very carefully about whether they continue investing.

“That means there will be a thinner seam of demand and fewer options for those looking to exit the sector.”

Ben Beadle, Chief Executive at the National Residential Landlords Association, said “Hiking stamp duty on homes to rent when 21 people are chasing every rental property makes no sense. 

“Analysis by Capital Economics has found that increasing Stamp Duty on rental properties from three to five per cent will see a net loss of half a million homes to rent over 10 years. This will not help the huge number of tenants for whom homeownership is still a distant dream.  

“The Chancellor has failed to heed the warnings of the Institute for Fiscal Studies that higher taxes on the rental market lead only to rents going up. What tenants needed was a Budget to boost the supply of new, high-quality rental housing. What we got is a recipe for less choice and higher rents.”  

Capital Gains Tax

Capital Gains Tax was raised with the lower rate going up from 10% to 18% and the higher rate up from 20% to 24%. But the rates on residential property will remain at 18% and 24%, much to many landlords’ relief.

Employers’ National Insurance

Landlords, agents and other property professionals employing staff will see Employers’ National Insurance contributions go up from 13.8% to 15%. And the threshold at which employers start paying drops from £9,100 to £5,000.

Employment allowance – which allows smaller companies to reduce their NI liability – to increase from £5,000 to £10,500.

Minimum Wage

From April 2025, national living wage will increase 6.7% to £12.21 per hour, and the national minimum wage for 18–20-year-olds will increase 16.3% to £10 per hour. The government also confirmed its intention to move toward a single adult wage rate.

Inheritance Tax

In a major change any unused pension funds will become part of the estate for IHT purposes and be liable to tax from April 2027.

Reeves says she will extend the Inheritance Tax threshold freeze for a further two years from 2028 to 2030. So, the first £325,000 of any estate can be inherited tax-free.

The tax-free amounts remain £325,000, or £500,000 for residences left to direct decedents, and £1m for married couples combining their allowances.

Budget in Brief

SDLT increase on Buy-to-lets

  • Surcharge on acquisition of second properties to be increased from 3% to 5%.

CGT rates increasing

  • CGT rates for residential property will remain at 18% and 24%. For other assets basic rate CGT to increase from 10% to 18%, with the higher rate rising from 20% to 24%.
  • Business Asset Disposal Relief remains subject to £1m lifetime allowance but the 10% rate only available until April 2025.  Rate increases to 14% in 25/26 and then 18% in 26/27.

Personal taxes and Employers’ NIC

  • 1.2% increase in rate of Employers’ NIC.
  • Threshold beyond which employers pay NIC reducing to £5,000.
  • Employment allowance – which allows smaller companies to reduce their NI liability – to increase from £5,000 to £10,500.
  • Rates of income tax and NIC paid by employees, and of VAT, to remain unchanged.

Major changes to IHT

  • Nil Rate Band and Residence Nil-Rate Band frozen until 2030.
  • IHT to be charged on inherited pensions from 2027.
  • Individuals will continue to be entitled to £325,000 Nil-Rate Band and £175,000 Residence Nil-Rate Band. The RNRB remains available only if the house is inherited by direct descendants.
  • Business Property Relief to be reformed from April 2026.

Corporation tax

  • Will commit to maintaining 25% main rate over the life of this Parliament
  • Research and Development reliefs to remain.
  • Annual Investment Allowance to be maintained at £1m and full expensing to be unaffected.

Housing

  • Point at which house buyers start paying stamp duty on a main home to drop from £250,000 to £125,000 in April, reversing a previous tax cut.
  • Threshold at which first-time buyers pay stamp duty tax will drop back, from £425,000 to £300,000.

Non-doms

  • Concept of domicile to be removed from April 2025 and replaced with a new residence based scheme.

Anti-avoidance

  • More investment in HMRC and expectation is that we will see new powers to target avoidance in the detailed notes.

Private equity (treatment of carried interest)

  • CGT to increase to 32% from April 2025.
  • Simplification of current regime promised.