2024 Budget – Initial Reaction from iHowz

2024 Budget: Unveiling Missed Opportunities in Addressing Critical Housing Needs within the PRS

In response to today’s 2024 Budget speech, iHowz offers an initial analysis of its implications for the Private Rental Sector (PRS).

Within the realm of the budget, a pivotal arena where financial decisions carve the nation’s trajectory, the focus narrows on the Private Rented Sector (PRS) housing. The PRS houses over 20% of the population and is currently at a critical juncture. However, within the budget speech, there’s a palpable hesitancy or incapacity apparent in both the government and Social Landlords to fulfil their housing responsibilities. The 2024 budget speech, in our opinion, constitutes a glaring missed opportunity — an oversight that could have breathed new life into the housing sector, specifically within the PRS. The consequence is a noticeable gap, a failure to address the urgent housing needs of a substantial section of the population relying on the PRS for their homes with little or no alternatives in the wider housing market.

Chancellor Ends Tax Scheme to Prioritise Affordable Long-Term Rentals Over Holiday Lets

During his Budget 2024 speech, Chancellor Jeremy Hunt declared the demise of a tax scheme that showered landlords of holiday lets with incentives, favouring instead those opting for long-term rentals. Dubbed the Furnished Holiday Lettings regime, this tax perk was accused of wreaking havoc on the housing market, leading to a shortage of affordable homes for locals. However, after the 2016 Section 24 tax relief adjustments for the Private Rented Sector (PRS), the tax incentives provided for holiday properties became a noteworthy attraction for this sector

Expressing concern over what he called the “distortion” caused by this regime, Jeremy Hunt emphasised the need for a tax system that prioritises the well-being of local communities. He vowed to scrap the Furnished Holiday Lettings regime, aiming to untangle the housing market and ensure more properties are available for long-term rental by locals. The changes will come into effect from April 2025. There will likely be a period of transition from that date.

Reforming Property Tax Incentives: Chancellor Hunt Announces the End of Stamp Duty Relief for Multiple Dwellings

Chancellor Hunt is also discontinuing the Stamp Duty Relief for multiple dwelling purchases, citing a lack of evidence supporting its intended purpose of fostering investment in the Private Rented Sector (PRS) and its reported frequent misuse. The Multiple Dwellings Relief (MDR) will cease to exist from June 1, 2024. Deals exchanged on or before March 6, 2024, and completed purchases before June 1, 2024, will still benefit from the relief. This decision follows scrutiny of Multiple Dwellings Relief, which was originally designed to encourage PRS investment but was found to be falling short of its objectives and subject to regular misuse.

Reduction in Capital Gains Tax on Property and a Reduction in National Insurance

In a strategic move aimed at stimulating residential property sales and increasing tax revenue, the Chancellor announced a reduction in the higher rate of Capital Gains Tax (CGT) on property from 28% to 24%.

National Insurance – Decreased Rates Amidst widespread speculation leading up to the Budget Statement, Chancellor Hunt revealed the headline-grabbing 2p reduction in National Insurance (NI) rates towards the end of the announcement. Effective April 6, 2024, NI for PAYE employees will decrease from 10% to 8%, and for self-employed from 9% to 6%.

iHowz’s Initial Reaction to the 2024 Budget

The majority of landlords rely on property rentals as their primary source of income. If landlords find it challenging to operate profitably, they may need to explore alternative means of earning a living, inevitably negatively impacting the housing market even further.

However, there seems to be a disconnect in the government’s grasp of this straightforward challenge. The National Insurance cut announced today does little to incentivise landlords to offer more homes at affordable rents.

Instead of resorting to what some may perceive as a desperate tax grab targeting holiday lets, a move imposed on landlords due to the burdensome tax regime, iHowz has consistently advocated for a thoughtful blend of reforms to invigorate and sustain the industry. Recognising the complexities landlords face, particularly in the wake of stringent tax regulations, iHowz envisions a more comprehensive and strategic approach to foster a thriving property market.

The call for reform extends beyond a mere adjustment of tax policies; it encompasses a multifaceted strategy aimed at not only supporting landlords but also ensuring a healthy and sustainable rental landscape. iHowz proposes a nuanced framework that considers the diverse challenges landlords face, encompassing issues such as affordability, property management, and the overall well-being of the rental sector.

iHowz Calls for Reforms

iHowz has consistently called for a mix of reforms to stimulate the industry including:-

  • Allow Registered Landlords to reclaim Supplemental 3% Stamp Duty Land Tax (SDLT) on rental properties.
  • Remove the requirement to pay a Supplemental 3% SDLT on lease extensions.
  • Index the Supplemental 3% SDLT threshold or link it to the standard SDLT threshold for increased consistency.
  • Rescind Section 24 of the 2015 Finance Act, addressing concerns about its impact on landlords.
  • Allow rental profits to qualify for pension contribution tax relief, aligning them with other business profits.
  • Extend the period for filing Capital Gains Tax (CGT) returns to 6 months, providing more flexibility.
  • Make residential letting property a qualifying asset for CGT roll-over relief, encouraging investment.
  • Remove the 8% CGT surcharge for rental properties or introduce retirement relief for a more equitable system.
  • Apply zero VAT rating to Conversion, Refurbishment, and Retrofit Works to match new builds.
  • Implement a 100% write-down of Energy Efficiency costs in the year of spending to incentivise eco-friendly investments.
  • Introduce grants with a long-term scheme recognising a realistic approach, emphasising a fabric-first strategy and achievable measures.

Inadequately insulated homes contribute to issues such as dampness and mould, resulting in increased heating costs for tenants. Investing in energy efficiency not only enhances the performance of homes but also generates numerous job opportunities. Moreover, well-insulated homes play a crucial role in reducing the risk of health issues, ultimately lowering associated costs for the health service. Prioritising energy efficiency is a holistic approach that benefits both residents and the broader community For a more comprehensive exploration of energy-related matters, we encourage you to delve into our previous article ‘Net Zero Plans: Still No Clear Guidance for UK Landlords‘.

Navigating Crisis: The Urgent Call for Government Recognition and Support in the Wake of 2024 Budget Shortfalls

The current housing shortage has driven several local authorities to the brink of bankruptcy as their budgets are increasingly allocated to emergency housing and related support. Moreover, the lack of funding to address court backlogs has led to significant delays in landlord-tenant cases, with waiting times doubling or even tripling. This extended timeline forces some landlords to consider selling their properties and redirecting their investments.

It prompts a pressing question: When will the government accord the housing industry the respect it deserves? Landlords, who independently fund housing initiatives at minimal risk to the government, provide a crucial service. Despite this, the Private Rental Sector (PRS) becomes a political football, satisfying opportunists without concrete solutions.

Unfortunately, the recent unveiling of the 2024 budget appears to offer no respite. Instead, it raises concerns that the housing crisis may intensify, further emphasising the need for a more supportive and strategic approach to address the challenges facing both landlords and tenants.

 

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