The Autumn Budget 2024: Plucking Buy to Let

The consequences of the recent budget for the Buy to Let market

Jean-Baptiste Colbert, Louis XIV’s finance minister is often quoted that “the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest amount of hissing”.

The most obvious plucking of the Buy to Let market in Wednesday’s budget was the increase in the additional rate of Stamp Duty Land Tax (SDLT) from 3% to 5% - payable by the majority of buy to let investors purchasing properties. This is not an insignificant amount of money to pay in one go, however the Treasury will have calculated that this is an additional cost that buy-to-let investors will take on (with a bit of hissing) will not affect their overall appetite to do business. It wouldn’t work as a tax if it resulted in less transactions taking place, so an overall reduction in the tax take. This increase in SDLT came as a surprise, as it had not been leaked ahead of budget day.

The rumoured increase in Capital Gains Tax for gains made on the sale of property did not appear. No hissing here.

One of the biggest fears for the Rachel Reeves must have been that she would suffer her own “Truss moment”. That the increased borrowing she was planning would panic money markets and drastically increase swap rates for UK debt, thus increasing the cost of borrowing for the UK government, and also UK mortgage borrowers. This does not appear to have happened so far, probably because of the large amount of theatre that has gone on for weeks in the run up to the budget to make it clear what was coming, and that it was additional borrowing for investment, not to fund government spending. This is clearly good news for the UK property market, especially ahead of what must now be almost inevitable Bank of England Base Rate cuts. Thankfully no hissing.

The bigger news – though not so obvious – for the buy to let market in the budget was the widening of Inheritance Tax to include personal pensions – which to date fell outside of a person’s estate for Inheritance Tax purposes. A whopping 40% tax will be potentially applied from 6^th April 2027 to unused pension funds and pension death benefits. For the wealthy it will be no longer possible to use pensions to avoid Inheritance Tax. One of the more obvious destinations for investment which would otherwise have gone into these pensions will be limited companies that invest in buy to let properties, overlain with an element of tax planning.

This budget is the first of several which the current Labour government is expected to deliver. There may well be more plucking and a lot more hissing to come.

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*Blacks Solicitors does not provide financial advice and the content of this blog post is for informational purposes only.