Recent budget changes raise concerns over rental supply and increased rents.
- Following the Budget, Stamp Duty on second homes has risen significantly from 3% to 5%.
- Experts fear that this increase could drive investors away from the private rental sector.
- NAVA Propertymark suggests targeted tax reliefs to mitigate the negative impacts.
- Capital Gains Tax rates have been adjusted but residential property rates remain unchanged.
The recent Budget announcement has led to significant changes in Stamp Duty Land Tax, particularly impacting stamp duty on second homes, which has seen an increase from 3% to 5% effective from the end of October 2024. NAVA Propertymark, a major trade body, has expressed its concerns, predicting that this could result in investors withdrawing from the private rental sector (PRS). Such a withdrawal is likely to shrink the available housing stock for renters, thereby driving up rent prices.
Stuart Collar-Brown, president of NAVA Propertymark, voiced his apprehensions regarding this tax hike, stating that local authorities are also doubling down on council tax on second homes, which would further incentivize investors to exit the market prematurely. “There is little doubt that these collective forces will impact investors,” he noted, “leading to fewer homes available for rent and consequently increasing rental prices.”
Beyond the adjustments to Stamp Duty, the Budget impacted Capital Gains Tax, where rates for non-residential assets were raised to align with residential properties—18% at the basic level and 24% at the higher rate. Fortunately for investors in residential properties, their tax rates remained unchanged, providing some relief amidst the broader financial adjustments.
NAVA Propertymark’s advocacy includes recommending specific tax reliefs to offset these burdens, arguing that the 3% surcharge should be reconsidered. The goal is to incentivize investment in rental properties rather than discourage it, in order to address the chronic shortage in housing supply.
The recent tax alterations pose substantial implications for the rental market, potentially leading to fewer rental homes and higher rents.
