Will the Spring budget make Buy to Let investors blossom?

On Wednesday 6^th March, Chancellor Jeremy Hunt announced his Spring budget.  The budget included some changes which will impact Buy to Let investors. Let’s take a look at how the announcement will impact Landlords and those who are looking to purchase a buy to let investment.

Holiday Lets

With warmer weather on the horizon, the thought of a getaway to a charming Holiday let is appealing to many. However, measures contained within the Chancellor’s budget will have an impact on the Landlords who own Holiday Lets.

The Furnished Holiday Lets (FHL) regime currently offers tax advantages to those who let out a property as a holiday home. At present, under the regime, Landlords can deduct the full cost of their mortgage interest from their rental income. However, from 6 April 2025, this favourable tax treatment afforded to these properties has been abolished. It is indicated that the government are looking to incentivise long-term tenancies, which may dampen the holiday let sector. This could in turn result in Landlords moving away from short-term lets and to adjust their investment model towards long-term tenancies.

Abolishing Multiple Dwelling Relief

Prior to the Spring budget, investors could acquire multiple properties simultaneously in one transaction with the incentive of a lower stamp duty tax rate. This stamp duty relief resulted in investors purposefully strategizing such transactions to take advantage of the scheme. However, the budget announcement abolishes this relief to take effect on the 31^st May. Thus, any purchases which are due to complete on or after the 1^st June 2024, unless exchanged before 6^th March 2024 will no longer be eligible for relief.

The impact this will have on the property market is yet to be seen.

Capital Gains Tax Reduction

From 6th April 2024, the government have reduced the higher rate of Capital Gains Tax (CGT) due on sales of residential properties from 28% to 24%. The lower rate has remained unchanged at 18%. This reduction is likely to encourage investors to sell properties within their portfolios which will have the benefit of increasing the number of properties on the housing market.

Closing thoughts

In summary, whilst some of these changes will be welcomed, others are likely to be less well received. Some argue that changes have been brought about with the general election in mind. This, of course, means that these could be short lived and further changes could follow within the coming months depending on the election outcome.

Subsequently, this may be an opportunity for Landlords to assess their current portfolios or for new investors to consider their options to maximise their property investments profitability. With so much uncertainty, what we can be certain of is that the Buy to Let property market is and will continue to remain a popular investment for many.