Landlords hit by Capital Gains Tax and Stamp Duty changes

Chancellor Jeremy Hunt has delivered his long-awaited Autumn Statement - the fiscal event which he says will lead to “all of us paying more taxes.”

Key tax changes:

- Halving the Capital Gains Tax annual exemption from £12,300 to £6,000 in 2023—24 and again to £3,000 in 2024-25 - a hit for landlords in particular. Tim Walford Fitzgerald, tax partner at HW Fisher says: “This is bad news for landlords, second home owners and those looking to sell their property as capital gains tax is applied at a much higher rate for residential property sales. Expect to see a decline in the number of disposals – people will hold off from selling their assets during unfavourable conditions. Or, if there is a delayed introduction for the new threshold, look out for a quick spike in sales as individuals and families try to beat the new implementation date.”

- The dividend allowance will be cut from £2,000 to £1,000 next year and then to £500 from April 2024. It means that by 2025, anyone receiving dividends above this amount (likely to include many landlords who have incorporated) will pay tax on them at a rate depending on how much other income they receive.

- Local authorities can raise council tax by five per cent without holding a referendum (that is three per cent, plus an additional two per cent if they have social care responsibilities). This is likely to be another pressure on private tenants and means band D council tax could rise from an average of £1,966 to as much as £2,064.

- Stamp Duty cuts announced in September will be time-limited, ending on March 31 2025.  Hunt says: “This is to help the jobs and firms that rely on the housing market through the current challenges, while strengthening the public finances in the longer term.” Earlier this autuumn former Chancellor Kwasi Kwarteng increased the threshold at which Stamp Duty is charged on residential purchases from £125,000 to £250,000 with the threshold for first-time buyers also up from £300,000 to £425,000 and to be used on purchases worth up to £625,000.

- Inheritance Tax thresholds frozen for an extra two years, making hundreds of thousands of home owners liable to IHT. The threshold currently stands at £325,000 with a further residential nil rate band set at £175,000. IHT is levied at 40 per cent above this level. 

- The threshold for when the highest earners start paying the top rate of tax will be brought down from £150,000 to £125,140. "Those earning £150,000 or more will pay just over £1,200 more a year, he says.

- Income tax personal allowance threshold will be frozen until 2028 the chancellor announces. This means millions of people will end up paying more in tax as their pay rises. The thresholds were already frozen until 2026.

- From 2025, road tax will be introduced for electric vehicles “so all motorists begin to pay a fair share. “  

- A very large increase in windfall taxes. Oil and gas companies' tax will increase from 65 to 75 per cent of profits on UK operations until March 2028, extended from December 2025. There will also be a 40 per cent tax on profits of older renewable and nuclear electricity generation.

Other changes:

- The Pensions Triple Lock and Pension Credit will be protected and rise in April 2023 by 10.1 per cent. Hunt says “this will support pensioners through the challenging economic situation.”

- Over 600,000 more people on universal credit people must meet with work coaches "so they can get the support they need to increase their work hours or earnings." 

- Another £280m will be invested to help the Department of Work and Pensions to crack down on benefit fraud and errors in the next two years.

- The government's review on the pension age will also be published in the New Year.

- It will be impossible to maintain the 0.7 per cent target of spending on overseas aid, Hunt says, until the economic situation allows. He insists he is committed to that target, but spending will remain at 0.5 per cent for until 2025 at least. 

- The budget for schools will be increasing by £2.3 billion next year and £2.3 billion the year after - taking the core schools budget to a total of £58.8 billion.

-  The government is making available: up to £2.8 billion in 2023-24 and £4.7 billion in 2024-25 for Adult Social Care, to help the most vulnerable. 

- There will also be £3.3 billion in 2023-24 and a further £3.3 billion in 2024-25 to improve the performance of the NHS. 

- New energy efficiency Taskforce to reduce UK energy demand by 15 per cent by 2030.

- To continue there ‘Levelling Up’ programme, the devolved administrations will receive £3.4 billion over the next two years. £1.5 billion for Scotland, £1.2 billion for Wales and £650m for Northern Ireland. 

- The government claims that building of new infrastructure such as roads, train lines and communities will be safeguarded by over £600 billion in capital investment over the next five years.  

Hunt spoke for almost an hour and the full speech he delivered, plus appendices, is 70 pages long - you can see it here.

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