The recent UK government budget has stirred a mixed response across industries, especially among property investors.
National headlines are focused on changes to National Insurance, inheritance tax, and business asset relief, which have many in the business sector on edge.
Rocket Property Management, however, sees both challenges and opportunities for the property market in the new budget.
Here’s our analysis of the most significant budget changes for landlords and property investors:
Key Stamp Duty Changes for Landlords and Investors
One of the main changes impacting property investors in this budget is the increase in stamp duty for those purchasing additional homes.
Traditionally, buyers paid a 3% surcharge on properties beyond their primary residence. With the latest changes, this surcharge rises to 5%, substantially increasing the cost for buy-to-let investors or anyone purchasing a second home.
In London, where property prices are high, this additional 2% can add up quickly. For example, on a £500,000 property, the increase translates to roughly £10,000 more in stamp duty.
With that being said, Rocket anticipates that this may push prices down slightly, providing a potential offset for investors. Nevertheless, we advise clients to factor this change into their budgeting and be prepared for higher upfront costs on additional properties.
For overseas investors not looking to use the property as a rental business, the single rate of stamp duty on dwellings worth over £500,000 has increased from 15% to 17%.
Potential Shifts in First-Time Buyer Activity
The budget confirms upcoming cuts to stamp duty relief for first-time buyers. As this relief is phased out, Rocket anticipates increased activity in the market between now and April, with first-time buyers seeking to take advantage of the current rates.
This shift may lead to slightly more active price negotiations for lower-priced properties in the short term, as these buyers aim to close deals before the changes take effect.
We’re already seeing this trend unfold. For example, a £300,000 flat we’re helping a landlord sell has received significantly more interest after a recent price drop, which suggests there is a heightened sense of urgency among first time buyers.
Decline in Furnished Holiday Let Benefits
One of the more targeted budget changes affects furnished holiday lets (FHLs). Starting in April 2025, FHLs will lose their special tax benefits, meaning all rental income will be taxed as a standard rental business.
The removal of these benefits may lead some FHL owners to convert properties into long-term rentals for a steadier income, potentially reducing the number of short-lets in the market.
For landlords who currently operate FHLs or are considering the short-let market, it’s worth re-evaluating the long-term profitability of this strategy. Rocket can assist landlords in transitioning from short-term lets to long-term rentals, which could provide more stability and ongoing tenant demand.
Non-Domiciled Tax Rules Adjustments
The budget introduces significant changes to non-domiciled (non-dom) tax benefits, removing the current structure by April 2025. Individuals residing in the UK will be taxed on worldwide income and gains, with an initial four-year grace period for individuals who have been out of the country for 10 or more years.
While this change has sparked concerns about high-net-worth individuals leaving the UK, Rocket anticipates that many overseas investors will continue to view UK property - particularly in London - as a worthwhile investment.
With the UK’s stable property market, non-doms looking to invest in British assets can still find value, especially in high-demand areas.
Capital Gains Tax Remains Unchanged
Capital gains tax (CGT) on residential property sales remains at the same rate. For basic-rate taxpayers, this means 18% on gains after allowable deductions, while higher-rate taxpayers will continue to pay 28%.
This stability provides some consistency for landlords considering selling properties. It’s worth noting that, under current rules, any CGT owed must be paid within 30 days of sale completion.
Emphasis on Digital Tax Compliance for Landlords
The budget outlines a push toward digital tax submission, mandating that landlords with an income of £50,000 or more through their rental properties must submit their tax returns online through the government gateway from April 2026.
This threshold will gradually decrease, with those earning over £30,000 required to comply in 2027, followed by landlords earning over £20,000 by the end of the parliamentary term.
Additionally, landlords will need to provide quarterly updates and maintain digital records. This change emphasises the importance of having organised, digital financial records, which Rocket can support through our record-keeping. Working closely with a qualified tax advisor will also be crucial for ensuring compliance as these changes roll out.
Broader Economic Impacts: Interest Rates and Rental Demand
While the budget introduced several changes, interest rates continue to be one of the most significant factors affecting the property market.
Following a recent rate cut, rates are expected to decrease further over the next year, albeit potentially at a slower pace due to budget changes.
For landlords and investors, lower interest rates will reduce borrowing costs and potentially increase the demand for properties, both in terms of purchases and rentals.
Rocket also anticipates a continued rise in rental prices in the medium term. London’s housing supply remains limited, with fewer buy-to-let investors entering the market and a substantial portion of properties being sold off. As the renter population grows, we expect rental prices to increase steadily, supporting stable returns for landlords.
Budget Takeaways and Rocket’s Advice for Landlords
While some parts of the budget may present challenges for landlords - such as the increased stamp duty on second homes and digital tax requirements - the overall impact on the property market is balanced.
For Rocket’s landlords, the budget’s changes don’t call for major strategy shifts, but rather adjustments and foresight:
- Factor in Higher Stamp Duty – Account for the increased stamp duty on additional homes if you’re looking to expand your portfolio, particularly if buying as an overseas investor.
- Monitor Short-Let Changes – With the end of tax benefits for holiday lets, now is a good time to evaluate the long-term viability of short lets.
- Stay Updated on Renters’ Rights Bill – While the budget has some impact, the Renters Rights Bill will likely influence the rental market significantly in the coming months and we will be keeping you in the loop with all updates.
- Prepare for Digital Tax Requirements – Begin digitising tax records and speaking with tax advisors to make sure you’re compliant with Making Tax Digital requirements.
Ultimately, the recent budget underpins the importance of being proactive, informed, and prepared. With Rocket’s expert guidance, landlords can navigate these changes strategically and hassle-free, meaning their investments remain intact and profitable.
