With the recent budget updates and the Bank of England’s base rate drop, let’s dive into what this could mean for you and your property investments.
1. Capital Gains Tax (CGT) Bump
Capital Gains Tax has gone up, which comes into play if you’re looking to sell a property. Rates have increased from 20% to 24% for higher earners, which is where most of our landlords sit, meaning a 4% jump.
For instance, if you’re planning to make £350,000 from a sale, you’ll see an extra £14,000 on the tax bill compared to last year. That’s a chunk, so it might make sense to think about holding on to properties a bit longer or looking at other options.
2. Stamp Duty Land Tax (SDLT) Increase
SDLT is now up from 3% to 5% for extra property buyers. This doesn’t hit existing landlords directly, but it’s worth noting that it may put off some buyers or impact sale prices.
On an average property around £530,000, this means an extra £10,600 in SDLT costs, which generally isn’t financeable. It could slow things down a bit if you’re planning a sale, but we’ll keep an eye on the market and let you know how it unfolds.
3. Why Holding Property as a Limited Company Looks Better
With CGT and SDLT on the rise, it’s even more tempting to think about moving properties under a limited company rather than owning them as an individual. As a company, you can claim mortgage interest as an expense, and you’ve got more flexibility to offset a range of costs against profits – meaning less tax liability overall.
4. Bank of England Base Rate Cut
On the plus side, the Bank of England just dropped the base rate by 0.25%. If you’re on a tracker mortgage or about to remortgage, that’s good news – lower payments are coming your way.
For a £300,000 buy-to-let mortgage, that cut could mean saving nearly £600 a year on a repayment mortgage or £750 on an interest-only mortgage. We may see another 0.25% drop, but it’s unlikely to go below 4% for the time being.
Final Thoughts
With higher CGT and SDLT, plus a slight cut in the base rate, there are some mixed signals here. If you’re thinking of selling, be aware of those CGT increases, but if you’re in for the long haul, the lower mortgage payments will be a welcome break. And if you’re debating company vs. individual ownership, now could be the time to chat about it.
As always, we’re here to help you make sense of it all – reach out if you’d like to discuss how these changes could impact your situation.
