We’re landlords – tax changes in Budget could push us off a cliff
Tenants could face higher rents or homelessness, experts claim.
“Anti-landlord” tax changes in the Budget show that the Government wants to push those who rent out their properties “off a cliff ” and could lead to higher rents, property owners say.
In his Budget on 6 March, the Chancellor, Jeremy Hunt, announced plans to cut higher rate capital gains tax (CGT) from 28 per cent to 24 per cent from 6 April this year. The tax is levied on gains when property owners sell up and so a lower rate could incentivise sales.
At the same time, Mr Hunt also said that a relief on landlords letting furnished holiday homes would be abolished from 6 April 2025.
Currently, landlords can claim mortgage interest as a business expense on holiday homes, allowing them to keep more of their rental income as profit.
Mr Hunt told MPs he was “concerned this tax regime is creating a distortion, meaning there are not enough properties available for long-term rental by local people”.
He said that cutting the tax reliefs would “make the tax system work better for local communities”.
Landlords say both measures will make the situation much worse for renters and push more people into homelessness, though rental campaigners say although the CGT cut could encourage more evictions, it’s unlikely to have a large effect on prices.
Rob Houghton, chief executive of property valuations firm reallymoving, said: “Cutting capital gains tax will encourage landlords who have been sitting on the fence to sell. With the supply of rental homes so limited and record high rents, this is going to make life even more difficult for tenants.”
Vanessa Warwick, a professional landlord and co-founder of landlord forum Property Tribes, said the move was “yet another anti-landlord policy from this government”.
She said: “They are effectively corralling landlords in a pen where the exit is a cliff. It seems they are actively forcing out private-sector landlords by closing each door or avenue that could allow a landlord to retain a slight profit margin and provide housing.
“Penalising holiday lets will result in yet more misery over the long term for landlords, tenants and communities.”
Mortgage rates have also shot up over the past two years, leaving many landlords facing remortgage with the option of raising tenants’ rents dramatically to cover their higher costs, covering the loss themselves or selling up.
Many are choosing the latter route, with the added threat of more red tape designed to protect tenants accelerating that process.
Some 26,000 households have been turfed out of their rented homes in the past five years using no-fault eviction legislation, according to analysis of Ministry of Justice data by the charity Shelter.
Another 30,230 landlords started no-fault eviction court proceedings last year, a 28 per cent rise in 12 months. This leaves fewer privately rented homes available, putting an upward pressure on rents.
A St Albans-based landlord, Steve Walsh, 59, has accused the Government of “playing cat and mouse” with landlords but not providing help for young renters to buy their home.
He said: “They’re closing that tax advantage while providing no help to families and young people who can neither afford to buy or rent.
“Given that the rate of capital gains tax has been reduced at the same time, the Government’s goal is clear: to encourage even more landlords to sell up. Who’d become a landlord today? It’s pretty hideous.”
Mr Walsh lives with his wife and two children and owns two rental properties in Birmingham, which he lets to students.
He inherited them from his father and has refurbished both to provide “really high-quality and energyefficient student housing”.
“It really matters to me that I’m giving my tenants a decent place to live,” Mr Walsh told i. “Even with there being more regulation and the changes planned by the Government, I still enjoy what I’m doing.”
Mr Walsh, formerly a software consultant and now a full-time landlord, said he had been considering buying another property but is increasingly unsure about whether to expand.
He warned that the changes announced in the Budget will mean more landlords evicting tenants so they can sell up. “Consequent upward pressure on rents and homelessness is inevitable. It is shameful incompetence. It’s scary. Housing policy decisions seem to be driven by politics, not what’s good for tenants.”
At the end of 2023, tenants renting outside London were paying an average of £1,280 a month – up 9 per cent in just one year, according to Rightmove.
In the capital the average rent hit £2,631 a month, a record high, and Rightmove is forecasting a further rise of up to 5 per cent this year.
Polly Neate (inset), chief executive of Shelter, said the Government is making a “political choice” to ignore the UK’s “housing emergency spiralling out of control”.
She said: “By ignoring the vast number of people losing their homes, the Chancellor is harming both the economy and people whose lives are being wrecked by homelessness.”
Dan Wilson Craw, deputy chief executive of Generation Rent, said: “We’re concerned that if the CGT cut encourages more sales as the Chancellor suggests, we’ll see more evictions and more families made homeless.
“If the Government wants to cut tax on these transactions, it should only be in cases where the tenant is staying put, either with a new landlord buying the property or buying it themselves.
“Landlords selling up won’t affect rents because the homes don’t disappear – someone will live in them whether they’re renting or buying.”
But Mr Walsh says the Government’s overall housing policy over the past 13 years has been disjointed, in his opinion.
“This is what a housing crisis looks like,” he said. “We’ve had 16 housing ministers in 13 years. There has been no coherent housing strategy for more than a decade.
“It is morally bankrupt to have allowed the situation to get to this.”