The much-anticipated Spring Budget was announced on March 4th, and there was plenty to unpack for landlords. Just in case you don’t have time to trawl through pages of announcements (what with all that landlording), we’ve compiled the juiciest tidbits into an easily digestible summary.
Read on and find out what the Spring Budget means for you.
Spring budget in a nutshell
- Stamp duty holiday extended until June 30th
- Capital Gains Tax break frozen at £12,300
- Corporation Tax is frozen for two years before moving from 19% to 25%
Stamp duty holiday extended
Let’s start with some great news: the popular stamp holiday, first announced by Chancellor of the Exchequer Rishi Sunak last year, was extended for a further three months. It will now run until June 30th, allowing the 300,000-plus homes currently transacting to complete without any fears of missing the deadline.
With the average house sale taking between two and three months, there’s still time to find a new buy-to-let investment and take advantage of the stamp duty holiday if you haven’t done so yet. You could potentially save thousands on your purchase.
Once the holiday comes to an end, it will taper off and apply to the first £250,000 on all homes (instead of £500k), before returning to the initial rate of £125,000 at the beginning of October. Landlords will continue paying the three per cent surcharge, but you can still expect to save under the new holiday rates.
Capital Gains Tax freeze
This is a big one, as many landlords and investors feared the worst when it came to capital gains tax (CGT) hikes. Understandably, the government needs to find some extra funds to help pay for the mess caused by Covid, but it won’t come from CGT just yet.
There were concerns that new rules could see higher taxpayers fork out an extra £24,500 when they sell their assets. Fortunately, that’s not the case. And while the Chancellor could have his eyes set on capital gains tax in the future, for now, its status remains unchanged.
Along with pensions lifetime allowance and the IHT and residence nil rate bands, the CGT break will be frozen at the current rate of £12,300 for individuals. So if you’re planning on selling one of your property investments, you won’t be at risk of higher rates.
What do corporation tax rates mean for ltd landlords?
As far as corporation tax goes, landlords who buy their property through a limited company can rest easy for the next two years. The Chancellor has frozen rates until 2023, at which point corporation tax will rise for the first time since 1974.
What does this mean for landlords? After the phasing out of tax relief between 2016 and 2020, many property investors set up a limited company to take advantage of the lower corporation tax rates. However, with those rates set to rise from 19 per cent to 25 per cent in the next few years, ltd landlords could see a tax grab on their profits.
It’s not time to hit the panic button just yet, though. The outlook is still unclear, especially as a “small profits rate” to benefit small firms and extra tax breaks to spur investment were also announced. It’s not yet known how – or if – these will affect ltd landlords.
An encouraging Spring Budget
Many landlords and investors waited for the Spring Budget with baited-breath, but you can breathe a sigh of relief. With an extension to the stamp duty holiday, a freeze on capital gains tax, and no corporation tax rise for two years, it’s mostly “as you were” in the property market. And that’s an encouraging place to be if you ask us.